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Emergency Economic Stabilization Act of 2008 Tax Extenders and Alternative Minimum Tax Relief Act of 2008
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On October 3, 2008, President Bush signed into law the "Emergency Economic Stabilization Act of 2008 (H.R. 1424)." Part of this $700 billion bailout package for the nation's stressed financial industry is a tax bill called the "Tax Extenders and Alternative Minimum Tax Relief Act of 2008." Below is a summary of the tax law changes that affect most taxpayers: State & Local General Sales Tax Deduction Reinstated This deduction had expired on December 31, 2007. However, under the new law it is extended for two years. So it may be claimed in 2008 and 2009. Property Tax Deduction Extended for Taxpayers Who Do Not Qualify to Itemize Deductions This deduction was created with the Housing Assistance Tax Act of 2008 that was signed into law on July 30, 2008. It was only for one year, 2008. Under this new law, it has been extended to include tax years 2008 and 2009. Cancelled Mortgage Debt Exclusion Extended The mortgage debt forgiveness exclusion is extended for three additional years, therefore it now applies to indebtedness discharged before January 1, 2013. For more information, see the Mortgage Forgiveness Debt Relief Act of 2007. Refundable Amount of Child Tax Credit Increased The refundable amount of child tax credit is increased for tax year 2008. Prior to this law, it was refundable to the extent of 15% of the taxpayer's earned income in excess of $12,050. For tax year 2008 ONLY, it is refundable for earned income in excess of $8,500. In 2009, the amount will change to a different threshold, which is set by statute. Casualty and Theft Losses For years 2008 and 2009, the new law increases the "per casualty" floor for casualty and theft losses of personal-use property from $100 to $500. In year 2010, the "per casualty" floor will go back to $100. IRA Distributions to Charity Taxpayers who have reached age 70 1/2 are permitted to make tax-free trustee-to-trustee contributions of their IRA to qualified charitable organizations for tax years 2008 and 2009. Qualifying taxpayers may exclude from gross income up to $100,000 of their qualified charitable distributions for each tax year beginning in 2008 and 2009 in addition to any qualified charitable distributions they may have made in tax years 2006 and 2007. Above-the-Line Deduction for Higher Education Expenses Reinstated This deduction had expired on December 31, 2007. However, under the new law it is extended for two years. So it may be claimed in 2008 and 2009. The maximum allowable deduction is:
Above-the-Line Deduction for Teachers' Classroom Expenses Reinstated This deduction had expired on December 31, 2007. However, under the new law it is extended for two years. So it may be claimed in 2008 and 2009. The above-the-line deduction for teachers' out-of-pocket classroom related expenses remains at a maximum of $250. District of Columbia Homebuyer Credit Reinstated This tax credit had expired on December 31, 2007. However, under the new law it is extended for two years. So it may be claimed in 2008 and 2009. Nonbusiness Energy Property Credit Reinstated for Year 2009 ONLY This tax credit had expired on December 31, 2007. However, under the new law it is reinstated for certain nonbusiness energy property placed in service between January 1, 2009 and December 31, 2009. Therefore, for year 2008, the credit is NOT available! Additional changes to the credit:
For more information on the nonbusiness energy property credit, see the Energy Incentives Act of 2005. Residential Energy Efficient Property Credit This tax credit had expired on December 31, 2007. However, under the new law it is reinstated for eight years, through 2016. Individuals are allowed a residential energy efficient property credit for expenditures for qualified solar electric property, qualified solar water heating property, and qualified fuel cell property. Additional changes to the credit:
Solar Electric Property - Under prior law, taxpayers were allowed a credit equal to 30% of the expenditures incurred for solar electric property installed in their residence. The credit was limited to $2,000. Beginning in 2009, the $2,000 credit limit no longer applies. This means the credit is 30% of the total cost. This change does NOT apply to tax year 2008! For more information on the residential energy efficient property credit, see the Energy Incentives Act of 2005. Alternative Minimum Tax (AMT) Relief The following AMT relief is temporary and ONLY applies to tax year 2008. AMT exemption amounts are increased from 2007 levels. The following exemption amounts apply to 2008:
The new law does not change the phase-out rules for the AMT exemption amount. Those amounts remain at the following:
For certain children with unearned income over $1,800, the AMT exemption amount cannot be greater than the sum of the child's earned income plus $6,400. In addition, the kiddie tax AMT exemption cannot be greater than $46,200 (the child's regular AMT exemption). Certain nonrefundable personal credits are allowed to offset AMT. This provision was due to expire at the end of 2007. The new law extends the offset through 2008. The affected nonrefundable personal credits are:
For tax years beginning in 2008, the aggregate amount of nonrefundable personal credits may not exceed the sum of the taxpayer's regular tax liability and the AMT. Other Tax Law Changes The bill contains many other tax changes, including, but not limited to:
Technical Explanation and Other Provisions of the Act
For more information on the Emergency Economic Stabilization Act of 2008 and the Tax Extenders and
Alternative Minimum Tax Relief Act of 2008,
click here
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