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Individual Incentives
Making Work Pay Credit
- $800 married couples filing jointly; $400 individual
- Phase out > $150,000 (couples); > $75,000 individual
- Reduced withholding or upon filing
$250 Economic Recovery Payment
- Individuals on fixed income (social security, disabled veterans, etc.)
- Reduces Making Work Pay Credit
AMT Patch
- Exemption amounts increased for 2009
- $70,950 joint filers (up from $69,950)
- $46,700 single filers (up from $46,200)
First-Time Home Buyer Credit
- Based on 10% of purchase price
- Maximum raised to $8,000 (from $7,500) joint; $4,000 (up from $3,750)
- Repayment requirement eliminated after 36 months
- Enhancements apply to purchases after 12/31/2008 and before 12/1/2009
New Car Deduction
- Sales/excise taxes deductible on first $49,500 of purchase price
- Leases not included
- Phase out between $250,000 - $260,000 joint; $125,000 - $135,000 single
- Effective on date signed by President
Education Credit: American Opportunity Tax Credit
- Enhancement of Hope Credit
- Up to $2,500
- Applies to all four years (up from two years)
- Adds course materials to qualified expenses
- Phase out between $160,000 - $180,000 joint; $80,000 - $90,000 single
- Effective for 2009 and 2010
Qualified Tuition Programs a/k/a 529 Plans
- Qualified expenses expanded to include distributions to pay for computers, computer technology and internet access
- Effective for 2009 and 2010
Unemployment Compensation
- Temporarily excludes first $2,400 of benefits from taxable
- Applies to benefits received in 2009
Business Incentives
Bonus Depreciation/Code Section 179 Expensing
- 50% first-year bonus depreciation extended through December 31, 2009 (retroactive to January 1, 2009)
- Extends increased code section 179 expensing through 2009 - Up to $250,000 on first $800,000 of capital expenditures
- Up to $250,000 on first $800,000 of capital expenditures
- First year “cap” on vehicle depreciation again raised for 2009 by $8,000 (to $10,960 for passenger vehicles; to $11,160 for light trucks and vans)
NOL Carryback
- Up to five year carryback allowed
- Applies only to businesses with average annual gross receipts of $15 million or less (over three years)
- Applies only to NOLs generated in 2008 (or tax years ending in 2008)
NOL Limitations on Banks Reinstated
- Code section 382 limitations on use of losses on acquisition of financially strapped banks will apply
- Effective for ownership changes after January 16, 2009
S Corp Built-In Gain Period Reduced
- Period assets subject to built-in gain tax on C to S conversion shortened from 10 to 7 years
- Applies to C corps converting to S corps in 2009 and 2010
Estimated Taxes
- For tax years beginning in 2009, qualified taxpayers can be safe-harbored based on 90% of prior year’s tax
- If > 50% of taxpayer’s income is from a small business (500 or fewer employees) and taxpayer’s AGI < $500,000
COBRA Benefits
- Individuals separated from service between September 1, 2008 and January 1, 2010 can pay only 35% of COBRA coverage and have it treated as paying the full amount
- Former employer pays remaining 65% and takes credit against income tax withholding and payroll taxes it would otherwise be required to remit to federal government
Energy Incentives
Residential Energy Property Tax Credit
- Increased from 10% to 30%
- $500 lifetime cap eliminated and replaced with a $1,500 aggregate cap for 2009 and 2010 installations
- Effective for eligible property placed in service after 12/31/2008 and before 1/1/2011
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