Obama Signs Economic Stimulus Package into Law

Here is a great summary of how the stimulus package might effect your taxes:



On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, which contains nearly $800 million in economic stimulus spending and tax relief designed to help individuals and businesses in the current economic climate. While the tax and accounting specialists at Cherry, Bekaert & Holland, L.L.P. (CB&H) review the Act to develop more detailed guidance for our clients and friends, here is a list of some of the new law's major provisions. Note that most of the benefits included in the new law are eliminated or phased out for higher income individuals; however, there is something for virtually everyone in this Act:

"Making Work Pay" Tax Credit
For 2009 and 2010, the Act creates a refundable tax credit of up to $400 for working individuals or $800 for couples with modified adjusted gross income (MAGI) that does not exceed $75,000 or $150,000 respectively. Qualified taxpayers will receive this credit either in the form of reduced withholding from their paychecks during the year or when they file their annual tax returns.

AMT Patch for 2009
The Act includes an alternative minimum tax (AMT) patch for 2009, which raises AMT exemption amounts above 2008 levels to $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for single filers and heads of households (up from $46,200).

First-Time Homebuyer Tax Credit
The Act expands the first-time homebuyer tax credit, originally enacted under the Housing Assistance Tax Act of 2008, increasing the maximum amount of the credit to $8,000 and eliminating the repayment obligation for qualified principal residences purchased from January 1, 2009 through November 30, 2009.

New Car Deduction
Effective for new vehicle purchases on or after February 17, 2009, the Act allows qualified taxpayers an above-the-line deduction for all state, local sales and excise taxes paid relating to the first $49,500 of the purchase price of a new car, light truck or other vehicle through the end of the year.

"American Opportunity" Education Tax Credit
For 2009 and 2010, the Act expands and renames the existing HOPE education credit, increasing the credit amount (subject to income limits) from $1,800 to $2,500 a year and applying the credit to all four years of college. The Act also makes 40% of the credit refundable and adds course materials as qualifying expenses.

Bonus Depreciation
The Act extends the first-year 50% bonus depreciation enacted under the 2008 Economic Stimulus Act for new business equipment purchases through December 31, 2009. The Act also extends through 2010 bonus depreciation for other qualified property.

Section 179 Expensing
The Act extends through 2009 the Section 179 depreciation deduction, originally enacted under the 2008 Economic Stimulus Act, for new and used business equipment, increasing the expensing amount to $250,000 and the threshold for reducing the deduction to $800,000.

Net Operating Loss Carryback
The Act enables qualified small business with average gross receipts of $15 million or less to carry net operating losses (NOLs) back for up to five years. The carryback provision applies to any NOL for tax years beginning or ending in 2008.

Cancellation of Indebtedness
The Act allows qualified businesses to recognize cancellation of indebtedness income over five years, beginning in 2014, for specified types of business debt repurchased or forgiven by the business after December 31, 2008, and before January 1, 2011.

Qualified Small Business Stock
The Act allows investors to exclude, through 2010, up to 75% of the gain from the sale of qualified small business stock acquired after February 17, 2009 and before January 1, 2011 and held for more than five years.

S Corp Built-In Gain Period
For C corps that become S corps in 2009 and 2010, the Act reduces the holding period to seven from 10 years for assets subject to the built-in gains tax.
This short summary is by no means a comprehensive review of the new law. Look for more details soon about how these and other provisions of the Act may provide you and your business with considerable opportunities to maximize tax savings, or contact your local CB&H tax professional today to ensure that you and your business receive the maximum possible benefit of these provisions.

FOR MORE INFORMATION, PLEASE CONTACT:Brooks Nelson, Partner bnelson@cbh.com 1.800.849.8281

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U.S. Treasury Department Circular 230 Disclosure: In accordance with applicable professional regulations, please understand that, unless specifically stated otherwise, any written advice contained in, forwarded with, or attached to this communication is not a tax opinion and is not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding any penalties that may be imposed under the Internal Revenue code or applicable state or local law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Source: Cherry, Bekaert & Holland, L.L.P. (CB&H)