| Fall 2008 |
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TaxAdvisor
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New Tax and Energy Provisions Accompany Revised Bailout Plan
In addition to the enactment of the $700 billion bailout that temporarily
increases FDIC insurance limits to $250,000 from $100,000 per individual
account, on Oct. 3, 2008, Congress also enacted the "Tax Extenders and
Alternative Minimum Tax Relief Act of 2008" (the 2008 Extenders Act) and the
"Energy Improvement and Extension Act of 2008" (the 2008 Energy Act) as part of
the economic bailout plan.
The 2008 Extenders Act provides extensions for several popular tax
breaks and includes the addition of several new relief provisions. Here is an
overview of key provisions in the new legislation.
General extensions through 2009:
- State and local general sales taxes deduction
- Qualified tuition deduction - For higher education expenses
- Teacher expense deduction - For up to $250 of educational expenses
- IRA rollover provision - For tax-free contributions from IRA plans to
qualified charitable organizations
- Additional standard deduction for real property owners - For non-itemizers
- Research and development credit - In addition, the alternative simplified
credit is increased from 12 percent to 14 percent for the 2009 tax year and
the alternative incremental research is repealed for the 2009 tax year.
- 15-year write-off for qualified leasehold, restaurant and retail
improvements
- Basis adjustment to stock of an S corporation making charitable
contributions of property
- Deduction allowable with respect to income attributable to domestic
production activities in Puerto Rico
AMT Relief
There are three key AMT provisions included in the 2008 Extenders Act. Here
is a brief description of each one:
- One year stopgap fix - Under the new law, for tax years beginning in 2008,
the AMT extension amounts are increased to: 1) $69,950 for married individuals
filing a joint return and surviving spouses; 2) $46,200 for unmarried
individuals (not surviving spouses); and 3) $34,975 for married individuals
filing separately.
- Personal credits - May be used to offset AMT through the 2008 tax year.
Includes dependent care credit, the elderly and disabled credit and the Hope
Scholarship and Lifetime Learning credits.
- Extension and modification of AMT credit allowance against incentive stock
options (ISOs) - Provides additional relief to affected taxpayers by
accelerating the refund of taxes paid on "phantom" income and by stopping
further IRS efforts to collect those taxes.
To help raise revenue, the new legislation offsets the cost of the tax break
extensions by requiring hedge fund managers and others to account for deferred
compensation as it accrues, rather than avoiding appropriate and timely income
taxes.
The 2008 Energy Act includes a package of energy-related tax
incentives designed to spur investment and create jobs in the renewable energy
industry. Here is an overview of two key energy provisions affecting our core
client base:
- Long-term extension and modification of the residential energy-efficient
property credit - The credit for residential solar property is extended
through 2016 and the credit cap for solar energy investments is removed.
Residential small wind investment, capped at $4,000 and geothermal heat pumps,
capped at $2,000 are added as qualifying property. **This credit may be used
to offset the AMT.
- Extension of energy-efficient buildings deduction - The law allowing
taxpayers to deduct the cost of energy-efficient property installed in
commercial buildings is extended through 2013.
If you have questions or would like more information, please contact Dale
Ruther, Partner, Taxation Services at 330-762-9785 or
dale@bobermarkey.com.
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