On February 13, President Bush signed into law the Economic Stimulus Recovery Act of 2008, a $152 billion package of tax rebates and business investment incentives to bolster the economy. Below is an outline of major provisions of the Act.
Rebates for Individuals
Basic Credit: Eligible individuals receive a basic credit in 2008 equal to the greater of the following: Net income tax liability not to exceed $600 ($1,200 in case of joint returns); $300 ($600 in case of joint returns) if the eligible individual has qualifying income of at least of $3,000. Qualifying income includes earned income, social security benefits, and veteran’s payments for the individual.
Qualifying Child Credit: If an individual is eligible for basic credit, the individual may also be eligible for qualifying child credit. The qualifying child credit is $300 for each qualifying child (dependent children under age 17). There is no cap on the number of qualifying children who may be eligible.
Limitation Based on AGI: Higher income individuals with an adjusted gross income of $75,000 or more ($150,000 for joint filers) would see their check reduced by 5 percent for each $1,000 in earnings above the cap. For an individual without children, the rebates would be completely phased out at $87,000, and joint filers without children would get no rebate if they have an income of $174,000 or more.
Valid Identification Numbers: For rebate purpose, social security number is the valid form of identification and not the identification issued by IRS (such as ITIN).
Rebate Checks: Most taxpayers will receive this credit in the form of a check issued by the Department of the Treasury. But if the IRS has an individual’s direct deposit information, then it may utilize that instead of mailing the check. The amount of payment will be computed in the same manner as the credit, except that it will be done based on tax returns filed for year 2007 (instead of 2008). Taxpayers who file late will receive payments later. If you are eligible for a rebate, all one has to do is to file a 2007 tax return and the IRS will do the rest. No checks will be sent out after December 31, 2008.
Business Expensing Increase for 2008: The law allows an additional first year depreciation deduction equal to 50 percent of the qualified property bought after December 31, 2007 and placed in service in year 2008. Also, the limit for expensing under Code Section 179 was increased from $128,000 to $250,000. The phase-out threshold was raised from $510,000 to $800,000 for year 2008.
Housing/ Financial Services Sector
The limit on government sponsored enterprises conforming loans and Federal Housing Administration-insured loans was also raised to a maximum of $729,750 for year 2008 only. The limit on FHA-insured loans was $367,000 and the limit on conforming loans that can be bought by Fannie Mae and Freddie Mac was $417,000. The one-year increase in the loan limit was done to increase the size of the market for purchasing and securitizing home loans.
Parveen Maheshwari is a Certified Public Accountant. His office is located in Burlingame, CA and can be reached @ 650-340-1400 or firstname.lastname@example.org