Summer 2008 Volume XVIII, No. 1 Newsletter

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It’s Different Here:

winterI try to model my CPA practice like a family business. Remembering back to a day when professionals actually returned phone calls (or emails if you like), when professional advisors actually listened attentively to client concerns, and when professional advice was dispensed without consulting a timeclock -- this is the essence of what I’ve strived for since setting up my CPA practice in 1990. Our ‘family’ (Jeff, Ellen, Scott & Marilee), takes pride in joining your family and helping with your needs. If we don’t know the answer, we have a trusted circle of advisors, be it bankers, attorneys, insurance brokers, and money managers.

I’ve pulled together an exceptional group of CPA’s to provide the highest quality services for our clients. Working together as a group for many years, we’ve built a culture of mutual respect which recognizes, values, and rewards the unique contributions of each individual. This culture empowers each associate to be a leader, to take initiative, accept challenges and achieve goals. I’m proud to say, it’s different here...

Maryland’s Homestead Tax Credit Revamped:

When the Maryland General Assembly met for a special session during November, they passed a provision to the Homestead Tax Credit which now affects all homeowners in the State of Maryland. To help homeowners deal with large assessment increases, state law has previously established the Homestead Property Tax Credit. The Credit seeks to limit or cap the increase in taxable assessments each year to a fixed percentage, generally no more than 10% annually. The Credit is supposed to apply only to the owner’s principal residence. Previously, this credit was automatically granted.

Beginning in 2008, a one-time application is required to continue receiving the Homestead Tax Credit or to start receiving the credit if you are eligible but not receiving the credit. Applications have been mailed with a notice for those currently eligible for the credit. You may either complete a paper application or apply online at www.dat.state.md.us Please make sure to have that application notice or your current property tax bill when you apply because there are specific questions regarding your Real Property Account number and your Access Number, too.

The State is urging homeowners to file this application as soon as possible in order to ensure that the Homestead Tax Credit is granted. Important: Homeowners not reassessed until 2009 or 2010 may wait until then to submit a Homestead Tax Credit application.

IRS Raises Per-mile Vehicle Deduction:

In response to soaring gas prices, the IRS recently announced that it will raise the standard mileage rate that taxpayers use to deduct business miles to 58.5 cents a mile, an increase of 8 cents. Ordinarily, the IRS sets the standard mileage rate in the Fall for the next calendar year. But given the surge in gas prices, the IRS decided to make a mid-year adjustment to better reflect the cost of operating a vehicle. Gas prices have risen nearly 37% in one year.

The new rate will apply to miles driven from July 1 through Dec. 31 this year. Taxpayers will have to use the old rate (50.5 cents) to deduct miles driven during the first six months of the year. The higher rate will allow self-employed workers to deduct a larger amount on their 2008 tax returns. It will also benefit many workers whose employers reimburse them for the use of their vehicles. The federal government and most large companies base their reimbursements on the IRS mileage rate.

Financial Planning Corner

Long Term Care Insurance - A Six Question Primer:

  1. Do you want to pass down your wealth or property to your children? Nursing home care costs a least $192 a day or over $70,000 per year. That kind of cost can drain your financial reserves or retirement account quickly, leaving no legacy to pass on to those whom you care about.
  2. Do you intend to qualify for state aid? Most people are misinformed about state programs. Medicare covers only a limited amount of long-term care services, while Medicaid covers some long-term care services -- primarily care in a nursing home for people who have limited income and assets.
  3. How long do you think you will live? Advances in medicine and the knowledge of human health have increased the average lifespan by a few decades. But as you age, the chances that you may need long-term care also increase.
  4. Will your children be able to care for you as you age? The biggest myth yet. With more couples working, there is less time to care for family members. Additionally, family members are more geographically dispersed.
  5. When will you want to retire? Just because you may plan to retire at a later age doesn’t mean you shouldn’t consider long-term care insurance. Experts now recommend that people as young as 50-years-old consider purchasing long term care insurance before the cost becomes prohibitively expensive.
  6. How healthy are you? You can become injured or ill enough at any age to need long-term care. If you wait until you are older and begin developing the health conditions that normally accompany aging, the coverage will be more expensive or may be difficult to obtain.

Kevin Bormel with MassMutual’s Thompson Financial Group contributed to this report. He can be reached at kbormel@finsvcs.com

2008 Dollar Limitations for Retirement Plans:

Annual dollar limit for defined contribution plans, SEP’s $46,000
Maximum salary deferrals for 401(k), 403(b) plans $15,500
Catch-up contribution limits for 401(k), 403(b) plans $5,000
Maximum salary deferral for SIMPLE IRA plans $10,500
Catch-up contribution limits for SIMPLE IRA plans $2,500
Maximum IRA contribution $5,000
Catch-up contribution limits for IRA’s $1,000
Social Security taxable wage base $102,000

Closing:

We hope that you are enjoying your summer. We’re very pleased with the feedback that we’ve received during the first seven months of the year - your communication with us lets me know what we’re doing right and what areas need further attention. I’d like to thank everyone for the many client referrals during the year. They are very much appreciated.

Periodically we have tickets available for sporting events. We still have tickets available for selected Orioles games. If you would like a pair, please don’t hesitate to call.

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Matthew R. Horowitz, C.P.A.
(410) 312-7622 • email
10015 Old Columbia Rd. Suite B-215, Columbia, Maryland 21046