On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008. Media coverage has concentrated on the $700 billion financial industry bailout, but the package also contained tax extenders and alternative minimum tax relief provisions, featuring many individual tax law changes. Here’s a brief summary of some of the provisions affecting individuals:

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Alternative Minimum Tax (AMT) Relief: For 2008 only, the new law increases AMT exemption amounts to:
$69,950  Married Filing Jointly and Surviving Spouses
$46,200  Single and Head of Household
$34,975  Married Filing Separately
Unless Congress intervenes with additional legislation, these increases are set to expire after 2008, and exemption amounts will plummet back to the year 2000 levels.
Another provision of the law allows certain “nonrefundable” personal tax credits to offset AMT, as well as regular tax, through the end of 2008. Some of these credits are: Child Tax Credit, Adoption Credit, Dependent Care Credit, Credit for the Elderly, Hope and Lifetime Learning Credits, Residential Energy Efficient Property Credit, and Savers Credit. The law also liberalizes the method of determining the AMT refundable credit that was first enacted in 2006.

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Energy Saving Home Improvements: Two tax credits for energy saving improvements to personal residences have been extended and expanded.

(1) The Residential Energy Efficient Property Credit has been expanded and is extended through 2016 for residential expenditures for qualified solar energy property and qualified fuel-cell property. For 2008, you can claim a tax credit of 30% of the cost of qualified property, up to a $2,000 maximum credit. After 2008, there is no dollar limitation on the credit. Additionally, the credit includes expenditures for residential wind property and geothermal heat pumps.

(1) The Non-business Energy Property Credit for 2009 allows a lifetime nonrefundable credit of up to $500 for making qualified energy saving improvements to your home (only $200 of this credit may be for qualifying window expenditures) after 2008.

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Reinstated and Extended Tax Breaks: The following tax breaks had expired at the end of last year. The new law retroactively reinstates them for 2008, and extends them to 2009:

• The option to deduct general sales taxes in lieu of state and local income taxes.
• The above-the-line deduction for qualified tuition and expenses.
• The above-the-line deduction for educator’s out of pocket expenses up to $250.
• The $100,000 (maximum) annual exclusion from gross income for taxpayers age 70 ½ or older who directly transfer IRA distributions to qualified charitable organizations.

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Property Tax Deduction for Non-Itemizers: This deduction, originally created by the Housing Assistance Tax Act of 2008, allows non-itemizers to deduct state and local property taxes of up to $500 ($1,000 for joint filers) in addition to the standard deduction. The new law adds a second year for the deduction now available in 2008 and 2009.

Home Mortgage Debt Forgiveness Relief: The mortgage debt forgiveness exclusion is extended for three additional years to 2013. Taxpayers my exclude from gross income up to $2 million of mortgage debt forgiveness related to qualified principal residence indebtedness.

Refundable Child Tax Credit: The refundable amount of child tax credit is increased for 2008. The credit is refundable to the extent of 15% of taxpayer’s earned income in excess of $8,500 ($12,550 for 2009).

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Casualty and Theft Losses: The new law waives the 10% of AGI limit for 2008 and 2009 for victims of federally declared disaster areas. Plus, for these years, permits non-itemizers to claim a deduction for federal disaster losses. However, for 2009 only, the new law boosts the $100 per casualty limit to $500.

Securities Transactions: After 2010, Stock brokers will have to report customer’s adjusted basis of stock sold on Form 1099-B along with the name and address of the customer, when the sale took place, what was sold, and the gross proceeds of the sale. The new information reporting requirement is designed to boost compliance efforts.

These are only highlights of the new law. If you would like more information, or details of how the changes will affect you, please contact us at your convenience.

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