Summary of bill:
Feb. 14, 2008 - The economic stimulus bill that the White House and Congress agreed was needed was signed by the President today. After stalling in the Senate for a week, the bill was passed by an 81-16 vote on February 8. Within hours, the House sent the economic stimulus bill to the President’s desk with a lopsided 380-34 vote. The $151.7 billion stimulus package closely resembles the original House bill, H.R. 5140, passed on January 29 by an overwhelming majority and with full White House support. That proposal relied on personal income tax rebates and temporary 50% bonus depreciation and expanded section 179 limits to encourage business investment. The Senate’s weeklong attempt to add additional measures to the bill failed. The amendment only added tax rebates to low-income seniors and disabled veterans and temporarily raised the limits on government-sponsored enterprises conforming loans and on loans the Federal Housing Administration can insure. Controversial items such as increased unemployment assistance, energy tax incentives, and additional funding for the low-income home energy assistance program were absent from the final bill. In a news release issued February 13, the IRS said it would automatically start sending rebate payments in May based on taxpayers 2007 income tax returns.
While media attention on the economic stimulus package recently signed by President Bush has focused on the rebate checks that will be distributed soon to most individual taxpayers, the package includes two other provisions of interest to businesses and their owners.
· Bonus depreciation for purchases of new equipment or fixed assets. Companies purchasing qualifying new equipment or assets can depreciate an additional 50% of the value of those assets in the first year, significantly accelerating their depreciation benefits.
· Section 179 limits almost doubled. The limit on the Section 179 deduction, which allows qualifying businesses to expense certain purchases instead of depreciating them over time, is essentially doubled to $250,000.
· Higher limits for conforming mortgage loans. The stimulus package also allows Freddie Mac and Fannie Mae to purchase loans as high as $729,750, up from the current limit of $417,000. This will result in a much higher threshold before a mortgage is considered a “Jumbo” loan, which could result in lower interest rates on many larger mortgages.
Business owners and executives should discuss these possible benefits with their tax advisors. The information below summarizes the provisions of the economic stimulus package.
Economic Stimulus Act of 2008
Individual Tax Provisions
Income Tax Rebates (phased beginning at income of $75,000 for singled taxpayers, $150,000 for joint returns):
· Individual – up to $600
· Joint – up to $1,200
Rebates for recipients, with no tax liability, but at least $3,000 in social security and veterans disability payments:
· Individual – up to $300
· Joint – up to $600
Refundable Child Tax Credit (phased beginning at income of $75,000 for singled taxpayers, $150,000 for joint returns):
· $300 per child
Business Tax Provisions
Section 179 for 2008:
· $250,000 expense limit
· $800,000 phase-out
Bonus Depreciation:
· 50% for first year assets purchased in 2008
Other Provisions
Limits on mortgages that can be bought by government-sponsored enterprises, insured by FHA:
· Increase to $729,750 from $417,000 and $362,790
