Tax Tip from the week of October 13, 2008
New law will affect your tax planning
While the economic impact is not yet clear, the recently enacted Emergency Economic Stabilization Act of 2008 contains provisions that remove some tax planning uncertainty.
Here's an overview:
- Increased alternative minimum tax (AMT) exemption. For 2008, the amount you can use to offset your AMT is $69,950 when your filing status is married filing jointly ($46,200 for singles).
- Sales tax deduction. For 2008 and 2009, you once again have the option of taking an itemized deduction for state and local sales taxes instead of income taxes. As before, you can save receipts and deduct the actual amount paid, or you can use IRS tables.
- Tuition and fees deduction. Under the new law, the above-the-line deduction for qualified higher education learning expenses is extended through 2009. This break is available even if you don't itemize, and can reduce your taxable income by as much as $4,000. Income limits apply, however.
- Educator expense deduction. You can deduct up to $250 of books, supplies, equipment, and software purchased for use in your classroom during 2008 and 2009.
- Charitable distributions from IRAs. If you're age 70½ or older, for 2008 and 2009 you again have the opportunity to make tax-free qualified charitable distributions of up to $100,000 from your IRA. While the distributions cannot be claimed as charitable deductions, they count toward your annual required minimum distribution without affecting taxable income.
- Energy credits. The credit for energy efficient home improvements such as exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners, and water heaters was reinstated for 2009.
- Depreciation incentives. You can use 15-year straight-line depreciation for qualified restaurant and leasehold improvements purchased and placed in service through 2009.
- R&D Credit. The research and development credit for businesses is modified and extended through 2009.
The Act includes revisions and enhancements to other deductions and credits for businesses and individuals, as well as disaster recovery relief for certain areas of the Midwest and other federally declared disaster area victims. Please contact us for details on the provisions that affect you.