New law will affect your tax planning
While the economic impact is not yet clear, the
recently enacted Emergency Economic Stabilization Act of 2008
contains provisions that remove some tax planning uncertainty.
Here's an overview:
- Increased
alternative minimum tax (AMT) exemption. For 2008, the
amount you can use to offset your AMT is $69,950 when your filing
status is married filing jointly ($46,200 for singles).
- Sales tax
deduction. For 2008 and 2009, you once again have the
option of taking an itemized deduction for state and local sales taxes
instead of income taxes. As before, you can save receipts and deduct
the actual amount paid, or you can use IRS tables.
- Tuition and
fees deduction. Under the new law, the above-the-line
deduction for qualified higher education learning expenses is extended
through 2009. This break is available even if you don't itemize, and
can reduce your taxable income by as much as $4,000. Income limits
apply, however.
- Educator
expense deduction. You can deduct up to $250 of books,
supplies, equipment, and software purchased for use in your classroom
during 2008 and 2009.
- Charitable
distributions from IRAs. If you're age 70½ or older, for
2008 and 2009 you again have the opportunity to make tax-free qualified
charitable distributions of up to $100,000 from your IRA. While the
distributions cannot be claimed as charitable deductions, they count
toward your annual required minimum distribution without affecting
taxable income.
- Energy
credits. The credit for energy efficient home
improvements such as exterior doors and windows, insulation, heat
pumps, furnaces, central air conditioners, and water heaters is
available through 2009. You can claim a maximum credit of $500.
- Depreciation
incentives. You can use 15-year straight-line
depreciation for qualified restaurant and leasehold improvements
purchased and placed in service through 2009.
- R&D
Credit. The research and development credit for
businesses is modified and extended through 2009.
The Act includes revisions
and enhancements to other deductions and credits for businesses and
individuals, as well as disaster recovery relief for certain areas of
the Midwest and other federally declared disaster area victims. Please
contact us for details on the provisions that affect you.
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