New economic stimulus law passes:
In an attempt to boost the economy, Congress hammered out a new economic stimulus package in mid-February. The centerpiece of the new legislation, of course, is the highly publicized tax rebate program. However, other tax incentives targeted at the business sector were also included in the law.
Here’s a brief look at the major provisions in the new Economic Stimulus Package Act of 2008.
- Individual tax rebates. Most single filers will be entitled to receive a one-time tax rebate of $600. The rebates are doubled to $1,200 for joint filers. However, these rebate amounts will begin to phase out for higher-income taxpayers. The phase-out begins at $75,000 of AGI for single filers and $150,000 for joint filers, based on 2007 tax returns. Rebate checks are expected to begin arriving in May
A late addition to the new law also authorizes rebates for individuals who have no tax liability but received at least $3,000 of taxable income in 2007. This covers social security recipients and disabled veterans (or surviving spouses of disabled veterans).
Finally, you may receive an additional payment of $300 for each child under age 17. There is no limit on the number of rebates available for qualifying children.
Business incentives. Under the new legislation, a business may benefit from the following two tax provisions:
- Enhanced Section 179 deductions: The new law increases the write-off allowed for assets placed in service in 2008 from $128,000 to $250,000. In addition, the dollar limit for the maximum Section 179 deduction jumps from $510,000 to $800,000. Amounts over this threshold are reduced on a dollar-for-dollar basis.
- Bonus depreciation deductions: A business may be entitled to a 50% “bonus” depreciation deduction for new equipment placed in service in 2008. Any remainder that is left over after claiming the 50% deduction is still available for regular depreciation deduction
Finally, the new law also raises loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Authority (FHA). If you have any questions concerning the new tax breaks in the economic stimulus package, give us a call.
Homeowners get mortgage debt relief:
Congress often rushes to pass legislation just before adjourning for a holiday or recessing for the year, and 2007 was no exception. One of these last-minute bills was the Mortgage Forgiveness Debt Relief Act of 2007, which President Bush signed into law on December 20.
The law includes three major tax breaks for homeowners:
- Under prior law, the forgiveness of mortgage debt by a lender generally resulted in taxable income to the taxpayer. The new law allows homeowners to exclude up to $2 million of certain forgiven mortgage debt from federal taxable income. The exclusion is available for 2007, 2008, and 2009 and applies to foreclosures and renegotiations of qualified mortgages on primary residences. The amount of debt forgiven reduces the tax basis in the home.
- The 2007 deduction allowed for qualifying mortgage insurance premiums is extended for three more years – 2008 through 2010.
- Under prior law a surviving spouse could use the full $500,000 gain exclusion on the sale of a principal residence only if he or she sold the home in the year a joint return could be filed. Now for sales after 2007, a surviving spouse who qualifies for the full exclusion may claim it for sales occurring within two years of the other spouse’s death.
If you would like details on provisions that affect you, please call our office.
Written by Ben Lawler, CPA
CEO & President of ProActive Advisors, Inc.