Tax Extenders and Alternative Minimum Tax Relief Act of 2008
The “Tax Extenders and Alternative Minimum Tax Relief Act of 2008” and the “Emergency Economic Stabilization Act of 2008”, which were enacted on October 3, 2008, provides extensions for several popular tax breaks and the addition of several new relief provisions. Here's an overview of some of the key provisions in the new legislation:
Brokers’ statements to arrive later this filing season. The act extends the date by which brokers must furnish information forms to customers from January 31st to February 15th. In addition, brokers must report the customer’s basis in sold securities beginning in 2011 for stocks, 2012 for mutual funds and 2013 for other securities.
Deduction of state and local general sales taxes. The option to deduct state and local general sales taxes is extended through 2009.
Qualified tuition deduction. The above-the-line tax deduction for qualified higher education expenses is extended through 2009.
Teacher expense deduction. The provision allowing teachers an above-the-line deduction for up to $250 for educational expenses is extended through 2009.
Tax-free distributions from Traditional and Roth IRS’s. The provision allows qualified taxpayers to make tax-free distributions of up to $100,000 per year to qualified charities from their traditional and Roth IRAs for 2008 and 2009. Additional standard deduction for real property taxes. The standard deduction for real property taxes for non-itemizers is extended through 2009.
Energy credits. The credit of up to $500 for residential insulation, storm doors, etc. is extended to cover property placed in service through 2009.
Research and development credit. The research tax credit is extended through 2009. In addition, the alternative simplified credit is increased from 12% to 14% for the 2009 tax year, and the alternative incremental research is repealed for the 2009 tax year.
15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements. The 15-year write-off for qualified leasehold, restaurant and retail improvements is extended through 2008.
Boosted section 179 expensing. Businesses, with tax years beginning in 2008 will be able to expense currently, as opposed to taking depreciation deductions over a period of years, up to $250,000 (up from $128,000) of qualifying property placed in service during 2008. This annual expensing limit is reduced (but not below zero) by the amount by which the cost of qualifying property placed in service during 2008 exceeds $800,000 (up from $510,000). The expensing rules are eased for qualifying empowerment zone property, renewal property and GO Zone property. The amount of the expensing deduction is limited to the amount of taxable income from any of the taxpayer's active trades or businesses. There is no alternative minimum tax (AMT) adjustment with respect to property expensed under Internal Revenue Code Section 179.
Bonus depreciation makes a comeback. Bonus first year depreciation was first allowed following the terrorist attacks of 2001 but generally was not available for property acquired after 2004. The Act provides for bonus (accelerated) depreciation by allowing a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service in 2008. The taxpayer may elect out of additional first-year depreciation for any class of property for any taxable year.
Bonus depreciation is allowed for AMT purposes as well as for regular tax purposes.
Basis adjustment to stock and deductions for fair market value of certain charitable contributions by an S corporation. Favorable Subchapter S basis rules for gifts of appreciated property are extended through 2009. In addition, contributions of food, books and computer hardware to schools where S corporation shareholders can receive pass-through charitable deductions of this property equal to the fair market value rather than the S corporation basis in the property is extended through 2009
New law provides one-year stopgap fix to the Alternative Minimum Tax (“AMT”). To prevent the unintended result of having millions of middle-income taxpayers fall prey to the AMT, Congress has once again relied on a temporary “patch” to the problem, this time a one-year extension of the 2007 exemption amounts, increased slightly. Under the new law, for tax years beginning in 2008, the AMT exemption amounts are increased to: (1) $69,950 in the case of married individuals filing a joint return and surviving spouses; (2) $46,200 in the case of unmarried individuals other than surviving spouses; and (3) $34,975 in the case of married individuals filing a separate return.
Exclusion of mortgage debt relief from income. Home mortgage debt relief of up to $2 million will continue to be excluded from cancellation of indebtedness income through 2012.
I hope this information is helpful. If you would like more details about these changes, or any other aspects of the new law, please do not hesitate to call.