The Economic Stimulus Act was signed by President Bush in February. The Act provides a recovery rebate credit for 2008 (based on the returns filed for 2007). The IRS is not allowed to issue checks after December 31, 2008. Taxpayers will reconcile the amount of the credit with the payment they received by completing a worksheet calculating the amount of the credit based on their 2008 tax return. They will then subtract from the credit the amount of the payment they received in 2008. For many taxpayers, these two amounts will be the same. If, however, the result is a positive number, then the taxpayer may claim that amount as a refundable credit against 2008 tax liability. If the result is negative, the taxpayer is not required to repay that amount to the Treasury.
The 50-Percent Bonus Depreciation Act allows additional first-year depreciation equal to 50 percent of the adjusted basis of qualifying property with a recovery period of 20 years or less placed in service in year 2008.
For tax years beginning in 2008 only, the Enhanced Section 179 Expensing Act temporarily increases the maximum amount of capital investment that a taxpayer may expense, rather than depreciate from $128,000 to $250,000. The Act also temporarily increases the amount for which the Section 179 deduction begins to phase out in 2008 from $510,000 to $800,000.
The Housing Assistance Act was signed by President Bush in July. Gains from the sale of a principal residence will no longer be excluded from gross income under Code Sec. 121 for periods that the home was not used as a principal residence. This new rule applies to home sales after December 31, 2008, and is based on nonqualified use periods that begin on or after January 1, 2009. The rule prevents use of Code Sec. 121 exclusion of gain from the sale of a principal residence up to $250,000 ($500,000 for joint filers) for appreciation attributable to periods after 2008 during which a residence was used as a vacation home or as rental property before its use as the principal residence.
The First-Time Homebuyer Credit Act gives first–time home buyers a temporary refundable tax credit equal to 10 percent of the purchase price of a home, up to $7,500. The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in case of a joint return). The credit is effective for homes purchased after April 9, 2008 and before July 1, 2009. The Act provides for recapture of the credit ratably over 15 years with no interest charge, beginning in the second tax year after the year in which house is purchased.
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