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Expected Tax Provisions Included in Proposed Stimulus Package
Tax Law Change Addresses "AMT Patch"
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EXPECTED TAX PROVISIONS INCLUDED IN PROPOSED STIMULUS PACKAGE
Selected items adapted from The Kiplinger Tax Letter dated January 25, 2008
As most of you have already heard, President Bush and the House have submitted their version of the stimulus package and with it several tax cuts. This package is intended to stimulate a sagging economy and leaders of both parties agree that fast action is needed to get money into consumers’ hands. The Senate is expected to make some changes to the proposed package, but Kiplinger has outlined the tax provisions which should remain a part of the estimated $150 billion final package.
TAX REBATES
Tax rebates of around $1,200 for married couples and $600 for singles should remain in the package. Taxpayers with children under 17 will get an extra $300/child. The Senate is pushing for added unemployment benefits, so the amounts could drop a little in the final version of the package.
Low income filers will be entitled to a reduced rebate. Filers with $3,000 of income or more will receive rebates. Their checks could be limited to $600 for married couples and $300 for singles, plus the child rebate if applicable.
High income filers won’t get checks. Rebates will start to phase out at $150,000 of AGI for couples and $75,000 for singles, falling by $50 for each $1,000 over these amounts. The AGI amounts from the 2007 tax returns will be used.
The checks will not come out quickly, however. It’s expected that the checks won’t be issued until this tax filing season begins to wind down, although IRS is looking to do better than in 2001 when the rebate checks were issued from July-September.
BUSINESS TAX PROVISIONS
The tax provisions do not omit businesses. Of particular interest is the old fall-back provision that Congress and the President have used in the past, which is to increase the Section 179 expense and/or include a bonus depreciation component. This time, they’ve elected to do both.
For 2008, it’s expected that the Section 179 depreciation limit will increase to $250,000 (twice the current level). The increased deduction can be taken until over $750,000 of assets are placed in service.
The bonus depreciation component allows for 50% of the cost of new assets purchased in 2008 to be expensed. The balance of the assets purchase price can be written off via regular depreciation rules. As in prior versions of the bonus depreciation rules, used assets will not be eligible for the bonus deduction.
As we receive information on the final version of the package, we will update our website to include the provisions and also follow up with you via regular mail. For our taxpayers and business clients who will be affected by these provisions, we welcome your questions and will work with you in 2008 to plan accordingly. This year promises to be an exciting year with these provisions as well as a pending presidential election, so we’ll keep you posted as we hear things.
We wish you a prosperous 2008!
