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Emergency Economic Stabilization Act of 2008 Tax Changes Affecting Individuals
On Oct. 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (P.L. 110-343) ( “EESA”). Although virtually all of the press coverage of this law has concentrated on its hotly debated $700 billion financial industry bailout plan, the legislation also contains scores of tax changes, mostly beneficial, for individuals and businesses alike.
Here is a brief summary of the major tax provisions:
- AMT relief: The maximum AMT exemption amount is increased to $69,950 for married taxpayers filing joint returns and surviving spouses, to $46,200 for single individuals and head of households and to $$34,975 for married couples filing separately. Unless action is taken by Congress next year, the maximum AMT exemption reverts to where it was in the year 2000.
- Retroactively resuscitated and extended tax breaks: EESA retroactively resuscitates the following expired tax breaks so that they apply for 2008, and also extends them for one year:
- The option to claim an itemized deduction for state and local general sales taxes instead of the itemized deduction for state and local income taxes.
- The above-the-line deduction for qualified tuition and related expenses for higher education paid during the tax year.
- The up-to-$250 eligible educator's above-the-line deduction for books, supplies, computer equipment, etc., used by him or her in the classroom.
- The up-to-$100,000 annual exclusion from gross income for taxpayers age 70 1/2 or older who make direct transfers of otherwise taxable individual retirement account (IRA) distributions to qualified charitable organizations.
- Deductions for energy saving home improvements extended and expanded:
- A tax credit is available through 2016 to individuals who add solar energy equipment or fuel-cell equipment (new technology that converts fuel into electricity using electromechanical methods, and meets other detailed requirements) to their residences.
- A credit for buying as assortment of energy saving improvements has been made available for qualifying equipment bought and installed in 2009.
- Two-year extension of home mortgage debt forgiveness relief provision. EESA provides debt relief to homeowners who have been caught in the current mortgage crisis through 2012 by excluding discharges on up to $2 million of mortgage indebtedness secured by a principal residence.
- More detailed reporting of securities transactions – after 2010: Stock brokers must file an information return (Form 1099-B) for securities transactions they handle.
- Research and development credit. The research tax credit is extended through 2009.
- 15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements. The 15-year writeoff for qualified leasehold, restaurant and retail improvements is extended through 2008.
- Basis adjustment to stock of an S corporation making charitable contributions of property. Favorable Subchapter S basis rules for gifts of appreciated property are extended through 2009.
- Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. The provision allowing a Section 199 domestic production activities deduction for activities in Puerto Rico is extended through 2009.
- Other extended provisions. Other provisions extended through 2009 include:
- Qualified zone academy bonds.
- Indian employment credit.
- Accelerated depreciation for business property on Indian reservation.
- Tax credit for certain expenditures for maintaining railroad tracks.
- 7-year recovery period for certain motorsports racetrack property.
- Work opportunity tax credit for Hurricane Katrina employees.
- New markets tax credit.
- Increased rehabilitation credit for structures in the Gulf Opportunity Zone.
- Enhanced charitable deduction for qualified computer contributions.
- Tax incentives for investments in the District of Columbia.
- Enhanced charitable deduction for food inventory.
- Enhanced charitable deduction for contributions of book inventory to schools.
- Special expensing rules for certain film and television productions.
- Exception under Subpart F for active financing income.
- Charitable giving provisions extended for two years. EESA restores certain expiring charitable giving incentives and extends them for two years (through 2009). The extended provisions include:
- IRA charitable rollover
- Enhanced charitable deduction for food inventory.
- Enhanced charitable deduction for contributions of book inventory to schools.
- Enhanced charitable deduction for qualified computer contributions.
- Basis adjustment to stock of S corporations making charitable contributions of property.
- New tax incentives for charitable giving. New incentives for charitable giving contained in the new legislation include:
- Temporary suspension of limitations on charitable contributions..
- Increase in standard mileage rate for charitable use of vehicles.
Plug -In Electric Vehicle Provisions. EESA provides a tax incentive to purchase plug-in electric vehicles.
Please keep in mind that we have described only the highlights of how EESA affects you. Our topical newsletters are for general information purposes and should not be considered as legal advice. If you would like more details, please call any of the members of the Taxation Practice Group at your convenience at 717-232-5000.
Taxation Practice Group
Howell C. Mette
Peter J. Ressler
Lloyd R. Persun
James A. Ulsh
Jeffrey A. Ernico
Thomas F. Smida
Michael L. Mixell
Vicky Ann Trimmer
Mark D. Hipp
Jennifer D. Wetzel
Click here for more information on the Emergency Economic Stabilization Act of 2008.
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