On February 17, President Obama signed the stimulus bill into law, ending the fight over its passage (although the discussions about whether it was the “right” move are sure to continue for years to come). As you’ve probably already heard, there are many tax-related items contained in the new law in addition to its other provisions.

President Obama said the package will save or create more than 3.5 million jobs over the next two years, boost business and consumer spending and establish the groundwork for long-term economic growth.

The new law provides immediate and broad impact on both individuals and businesses and many of the tax provisions in the new law are retroactive to January 1, 2009. Some of the more broadly applicable tax-related (and a few nontax-related) items are as follows. Viewing the articles in their entirety requires Adobe Reader which you may obtain for free at www.adobe.com.

TAX CHANGES AFFECTING INDIVIDUALS AND FAMILIES
“Making Work Pay” credit. Provides an individual tax credit in the amount of 6.2% of earned income not to exceed $400 for single returns and $800 for joint returns in 2009 and 2010. The credit is phased out at adjusted gross income (AGI) in excess of $75,000 ($150,000 for married couples filing jointly). The credit can be claimed as a reduction in the amount of income tax that is withheld from a paycheck, or through a credit on a tax return. [Read More]

ALTERNATIVE MINIMUM TAX CHANGES
Alternative minimum tax (AMT) patch. Increases the AMT exemption amounts for 2009 to $46,700 for single taxpayers, $70,950 for married couples filing joint returns, and $34,975 for married taxpayers filing separate returns. Also permits personal credits to offset AMT through 2009 (instead of 2008). [Read More]

BUSINESS TAX CHANGES
Extension of bonus depreciation. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write off 50% of the cost of depreciable property placed in service in 2008 for use in the United States. The new law extends this temporary benefit for qualifying property purchased and placed into service in 2009. [Read More]

ENERGY TAX INCENTIVES
Business energy credit. Enhances the business energy credit by eliminating the cap on small wind property and repealing the basis reduction requirement for subsidized energy financing. Effective for periods after December 31, 2008. [Read More]

SUBSIDIZED COBRA COVERAGE
COBRA premium subsidy for workers involuntarily terminated between September 1, 2008 through December 31, 2009. Effective from the date of enactment, qualified individuals are entitled to a 65% subsidy of their COBRA premiums for up to 9 months. In addition, for those workers who were involuntarily released between September 1, 2008 and the date of enactment because they could not afford the premiums, they are given an extra 60 days to elect COBRA coverage and receive the subsidy. [Read More]

As is the case with most new tax-related legislation, its implementation by taxpayers is sure to raise many questions, so please call us at your convenience to discuss how it affects your own particular situation.

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Your Tax Partners,

Mark G. Cook, CPA, Partner
Steven J. Cupingood, CPA, Partner
John A. Eckweiler, CPA, Partner
Andrew L. Gantman, CPA, Partner
Donald G. Leve, CPA, Partner
Richard A. Linder, CPA, Partner
Carl H. Sasaki, CPA, Partner
Thomas E. Wendler, CPA, Partner

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.

Notice: Opinions, conclusions, and other information in this message are not intended to represent recommendations or advice to you or any other person. Each person's circumstances are unique, and we strongly suggest you discuss your specific situation with your professional advisor before taking any action based on the information herein or information to which this message refers