Financial rescue legislation makes over 100 changes to current tax law
Multiple credits and deductions for businesses included
The Emergency Economic Stabilization Bill of 2008 that passed Congress last week contains more than 100 tax provisions. The provisions range from special capital gain rules on certain securities to a one-year extension on the AMT patch.
For individuals and businesses, the tax items in the legislation mainly remove uncertainty about a number of provisions that expired and extend many of them. The following is an overview of some of the major tax provisions passed as part of the Stabilization Act.
Credits and deductions for businesses
A number of credits and deductions for businesses also made it into the new law. The extension and expansion of the research tax credit is by far the largest on the list in terms of dollars, which is projected to cost the Treasury over $8 billion in 2009.
Specific other items include:
- Enhanced deductions for contributions of food to charitable organizations and contributions of books and computer equipment to qualifying schools
- Depreciation provisions benefiting leasehold, restaurant and retail improvements
- Mine rescue training team credit
- Indian employment credit
- Railroad track maintenance credit
- American Samoa economic development credit
- Qualified Zone Academy Bonds
- Credit to encourage first-time homebuyers in the District of Columbia
AMT fix
A one-year fix (or patch) to the AMT is a significant tax provision in the new law. In 2007, the AMT exemption, which largely determines who falls under the alternative system, was set at $44,350 for single individuals and $66,250 for married couples filing jointly, but for this year these amounts were set to revert to just $33,750 for individuals and $45,000 for married couples filing jointly. The new law sets the exemption amounts at $46,200 for individuals and $69,950 for joint filers for 2008.
The legislation also extends and liberalizes the ability to take personal tax credits against the AMT and mitigates the effects of AMT when it is triggered by “phantom income” from incentive stock options, through a refundable credit.
Deductions, other provisions extended
The legislation does extend the following deductions to the end of 2009:
- Itemized deductions for state and local sales tax
- Qualified higher education expenses deduction
- Ability of educators to take an above-the-line deduction for school supplies
- Additional standard deduction for property taxes
Congress also extended the ability of people over age 70½ to contribute an IRA distribution of up to $100,000 to charity and exclude the amount from income.
The new law also enhances the child tax credit by lowering the floor for the refundability of the credit from approximately $12,050 to $8,500.
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