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Economic Stimulus Package Signed by President Bush
To Clients and Friends of the Firm:
In a rare bipartisan compromise, Congress has approved and the President has signed a two-year, $168-billion economic stimulus package designed to boost the economy by providing tax rebates of $600-$1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people as well as incentives for businesses. Here are some basic highlights of the new law:
Cash Rebate Provisions Eligible individuals will receive a rebate for 2008 equal to the greater of:
- the taxpayer's net income tax liability, up to a maximum of $600 ($1,200 for a joint return); or
- $300 ($600 for a joint return) if either (a) the taxpayer's qualifying income is at least $3,000; or (b) his net income tax liability is at least $1 and gross income is greater than the sum of the applicable basic standard deduction amount and one personal exemption (two personal exemptions for a joint return). Qualifying income is earned income generally, social security benefits, and veterans' disability payments (including payments to survivors of disabled veterans).
There is an additional $300 credit for each qualifying child for whom the child tax credit can be claimed. This is generally a dependent child who is under age 17 at the end of the year.
The rebates would start to phase out for individuals with taxable incomes over $75,000 ($150,000 for married individuals filing jointly). For joint filers with no children who would otherwise get the maximum $1,200 basic credit, the credit will be entirely lost at AGI of $174,000. A single filer with no children who would otherwise get the maximum $600 basic credit will lose the entire credit at AGI of $87,000.
The Treasury Department says the IRS will begin sending out rebates in May.
Business Incentives in the Economic Stimulus Act
Boosted Section 179 expensing
Under the Act, for tax years beginning in 2008, the $128,000 expensing limit is increased to $250,000, and the overall investment limit is increased from $510,000 to $800,000.
As a result of this incentive, businesses with moderate capital equipment needs will be able to obtain a full deduction for the cost of business machinery and equipment purchased in 2008, thereby reducing their effective cost for those assets.
Bonus depreciation makes a comeback
The Act provides for bonus (accelerated) depreciation by allowing a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service after December 31, 2007, and, generally, before January 1, 2009. The basis of the property and the depreciation allowances in the year the property is placed in service and later years are appropriately adjusted to reflect the additional first-year depreciation deduction.
We hope this information is helpful. If you would like more details about this or any other aspect of the new law, please do not hesitate to contact us at 212-303-1800.
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For information contact:
Alisa Morris
Director of Marketing
(212) 303-1880
amorris@rssmcpa.com
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