Law Office Report - Fall 2008
Tax Extenders in the 2008
Federal Bailout Legislation
A number of tax law changes were incorporated into the federal bailout legislation signed into law on October 3, 2008. Most of the changes are “tax extenders” that continue current deductions, credits or other tax incentives that were set to expire. A few of the more popular measures are listed below.
To the relief of many, the Alternative Minimum Tax (AMT) exemption amount was increased retroactively to January 1, 2008 as follows: for unmarried individuals it increased from $33,750 to $46,200; for spouses filing jointly it increased from $45,000 to $69,950; and for married filing separately it increased from $22,500 to $34,975. Unfortunately, this change is only effective for 2008. Those individuals subject to estimated tax payments should recompute the fourth installment to account for the retroactive increase in the AMT exemption amount.
A popular charitable deduction has also been extended so that taxpayers may exclude up to $100,000 from gross income for qualified IRA transfers to eligible charities. As in 2007, this is available only for taxpayers age 70½ or older who make transfers directly from their IRA to a charitable organization. The transfers must be made directly from the IRA trustee, and the charitable organization cannot be a donor-advised fund. A qualified distribution is not included in the taxpayer’s adjusted gross income, but it does count towards the donor’s required minimum distribution.
A popular business tax break has also been extended through December 31, 2009. This change allows for the 15-year write off of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. The property must be “eligible property” placed in service through December 31, 2009. This will allow businesses to write off the qualified property over 15 years instead of 39. Another similar tax break allows farm business machinery and equipment placed in service after 2008 but before 2010 to be treated as five-year property, allowing for a quicker recovery of the cost of such equipment.
Finally, two other popular tax breaks for individuals extended through 2009 are the above-the-line deduction for qualified higher education expenses and the additional standard deduction for real property taxes available for those who do not itemize.
Remember, the tax year-end for most individuals and businesses is just a couple of months away. Contact your attorney and other tax advisors to make sure you have proper planning in place.