During 2008 the President signed into law at least six different Congressional Acts amending the Internal Revenue Code. Many of the changes simply extend expiring provisions, while one Act, signed by the President on December 23rd, softens the tax effect of adverse market declines during the fourth quarter of 2008.
Alert: The following provisions are actual law as of December 31, 2008. In January 2009, Congress is considering and expected to pass amendments which could further modify the following.
We look forward to discussing with you in more detail any of the following that affect your particular situation.
1. Alternative Minimum Tax: To prevent millions of taxpayers falling prey to the AMT, Congress passed a one year stop gap extension of the AMT exemption. For tax years 2008, and 2008 only, the AMT exemption amounts are increased from their 2007 level as follows:
· From $66,250 to $69,950 in the case of married individuals filing a joint return and surviving spouses;
· From $44,350 to $46,200 in the case of unmarried individuals other than surviving spouses; and
· From $33,125 to $34,975 in the case of married individuals filing a separate return.
· The significance is that without this one year extension and without a similar extension for 2009, substantially more taxpayers would be subject to Alternative Minimum Tax because the exemption would be:
· $45,000 instead of $69,950 in the case of married individuals filing a joint return and surviving spouses;
· $33,750 instead of $46,200 in the case of unmarried individuals other than surviving spouses; and
· $22,500 instead of $34,975 in the case of married individuals filing a separate return.
2. Deductions – Charitable: Extends for 2008 and 2009 the up-to-$100,000 annual exclusion from gross income for taxpayers age 70 1/2; who make otherwise taxable individual retirement account (IRA) distributions that are qualified charitable distributions.
3. Deduction – Section 179: For tax years beginning in 2008, the maximum regular section 179 property expense deduction is $250,000. The $250,000 limitation is reduced by the amount by which the cost of section 179 property placed in service during the tax year beginning in 2008 exceeds $800,000.
4. Depreciation – Passenger Automobiles: For passenger automobiles placed in service in 2008, first year depreciation is increased by $8,000. The maximum first year depreciation is $10,960. The usual rules regarding deducting auto expense continue to apply.
5. Depreciation – Recycling: For property placed in service after Aug. 31, 2008, 50% first year bonus depreciation is allowed for any machinery and equipment (not including buildings or real estate), which is used exclusively to collect, distribute, or recycle scrap plastic, scrap glass, scrap textiles, scrap rubber, scrap packaging, recovered fiber, scrap ferrous and nonferrous metals or electronic scrap.
Visit the National Tax Law Firm of Horowitz & Weinstein for the full list of new tax laws.