2008 Tax Law Changes (Part 2)

2008 Tax Law Changes, continued

Fringe Benefit Parking Exclusion and Commuter Transportation Benefit. You can generally exclude a limited amount of the value of qualified parking and commuter highway vehicle transportation and transit passes you provide to an employee from the employee's wages. For 2008, the monthly exclusion for qualified parking increases to $220 (up from $215) and the monthly exclusion for commuter highway vehicle transportation and transit passes increases to $115 (up from $110).

Maximum Automobile Value for Using the Cents-Per-Mile Valuation Rule. Employers must include in an employee’s W-2 the fair market value of taxable fringe benefits received by the employee.

For employer provided vehicles, in general, the fair market value of an employer provided vehicle is the amount the employee would have to pay a third party to lease the same or similar vehicle on the same or comparable terms in the geographic areas where the employee uses the vehicle.

For 2008, an employer providing a passenger automobile for the first time for the personal use by an employee may determine the value of the personal use by using the vehicle cents-per-mile value rule if the vehicle's fair market value on the date it is first made available to the employee does not exceed $15,000 for a passenger automobile other than a truck or van, or $15,900 for a truck or van. Under the cents-per-mile rule the amount to be included in the employee’s wages is calculated at 50.5 cents per mile.

Changes for S-Corporations. The capital gain of an S corporation is not treated as passive investment income. This applies to tax years beginning after May 25, 2007. If a qualified subchapter S subsidiary no longer qualifies because of a sale of its stock, new rules apply as to how such a sale is treated. This applies to tax years beginning after 2006. Certain S corporations may be able to eliminate all earnings and profits attributable to tax years beginning before 1983. An electing small business trust may be able to deduct interest expense on indebtedness it incurred to acquire stock in an S corporation. This applies to tax years beginning after 2006. For tax years ending on or after December 31, 2007, certain corporations with reasonable cause for not timely filing Form 2553, Election by a Small Business Corporation, can request to have the form treated as timely filed by filing it as an attachment to Form 1120S, U.S. Income Tax Return for an S Corporation.

Continued next week

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