Oct 25 2008
The Emergency Economic Stabilization Act of 2008
The Emergency Economic Stabilization Act of 2008
On October 3rd, President Bush signed into law The Emergency Economic Stabilization Act of 2008. The law termed as a “financial bailout”, includes over 100 tax provisions and $150 billion in tax breaks over 10 years, with the majority of the relief outlaid in 2008 and 2009. Listed below, are the tax provisions which relate to individuals and businesses.
Extended Exclusion for Home owners- The bill extends the temporary rule for the cancelation of indebtedness income. The Mortgage Forgiveness Debt Relief Act of 2007 excluded up to $2 million of indebtedness secured by a principal residence. The current bill extends this provision from the end of 2009 to 2012.
AMT Provisions- The bill included several provisions to address the AMT trap which has caught up with more and more taxpayers as the AMT exemption has not been updated for inflation. The bill increase the exemption amount under AMT, $69,950 for married couples filing jointly and surviving spouses, $46,200 for single taxpayers, and $34,975 for those filing married and separate. The AMT provision also allows taxpayers to take personal credits to reduce AMT liability; it also removes the limitation on taking personal credits against regular tax liability.
State and Local Sales Tax Deduction- The bill extends the provisions created in the American Jobs and Creation Act of 2004, which allowed taxpayers to deduct state and local sales tax expense in lieu of state and local income taxes. The new law makes the deduction retroactive in 2008 and extends the deduction through year end 2009.
Higher Education Tuition Deduction- Bill extends the above the line deduction through year end 2009. It allows for the deduction of education expenses for the taxpayer, spouse, or dependent.
Additional Standard Deduction for Property Taxes- The new bill extends the additional standard deduction for real estate taxes for non-itemizing taxpayers through 2009. The maximum deduction is $500 for single taxpayers and $1,000 for joint filers.
Tax-Free Distributions from IRAs for Charitable Purposes- The new law permits taxpayers to distribute, tax-free, from IRAs for charitable purposes up to $100,000 through year-end 2009.
Research Tax Credit- The new bill extends the research tax credit to amounts paid or incurred in 2008 and 2009. New bill also raises the credit from 12% to 14%.
Leasehold and Restaurant Improvements- The bill provides qualifying restaurant improvements and leasehold improvements will be eligible for 15-year recovery rather than a 39-year period for two more years. Also Congress authorized a 15-year recovery period for certain improvements to retail space.
Energy Efficiency and Property- The bill extends several energy efficiency and energy property tax incentives. The Commercial Building deduction under Code Sec. 179D is extended through year end 2013. The residential energy efficient property credit is extended though year end 2016, along with adding incentives for residential small wind and geothermal and allowing taxpayers to use the credit to offset AMT.
If you have any questions feel free to contact me to discuss any of these provisions which may have an impact on you or your business.
Michael Dolezal, CPA
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