Emergency Economic Stabilization Act of 2008
Enacted October 3, 2008
- Troubled Assets Relief Program: Passed to solve the credit crunch in the US financial industry, allows the government to purchase troubled assets either directly or through an auction process.
- Executive compensation deduction for companies assisted by the Federal government will be limited. In a “direct purchase” situation, the Treasury Department will set the standards. If $300 million or more “troubled assets” are sold through auction, certain executive compensation will be limited to $500,000 per person.
- Fannie Mae & Freddie Mac stock losses by community banks and certain other qualifying institutions may be treated and deducted as ordinary losses if preferred stock was held on September 6, 2008 or was sold between January 1, 2008 and September 6, 2008.
- Mortgage debt relief: Taxpayers can exclude up to $2 million of mortgage debt forgiveness after 1/1/07 and before 1/1/2012 (previously 2010).
- Extension of the AMT patch for 2008 only, provides exemptions of $69,950 for MFJ and surviving spouses, $34,975 for MFS, and $46,200 for single and HOH.
- Nonrefundable personal credits may offset AMT tax liability.
- New law will abate AMT tax liability from the exercise of ISO’s prior to 2008, effective for any unpaid tax as of the enactment date. Interest & penalties to be abated as well.
- Retroactive extension of the state and local sales tax deduction for 2008 and 2009.
- Extension of the above-the-line higher education tuition deduction through 2009.
- Extension of the additional standard deduction for real property taxes through 2009 (this is a new deduction provided for in the Housing Assistance Act of 2008).
- Retroactive extension of the above-the-line deduction for teachers and educators for certain out-of-pocket classroom expenses, limited to $250, for 2008 and 2009.
- Retroactive extension of tax-free distributions from IRA’s for charitable purposes, $100,000 limitation, for 2008 and 2009.
- Enhanced child tax credit and revised definition of a “qualifying child.”
- Retroactive extension and modification of the research tax credit for 2008 and 2009.
- Retroactive extension of 15-year cost recovery for qualifying restaurant and leasehold improvements rather than 39-year recovery, for 2008 and 2009.
- Extension of enhanced charitable contributions of food, books and computer equipment to qualifying organizations through 2009.
- New Market Tax Credit temporary higher investment limits extended through 2009.
- Extension of certain Hurricane Katrina disaster relief packages through 2009.
- Temporary tax relief to Midwestern and Hurricane Ike disaster areas.
- National disaster relief for disasters occurring after 2007 and before 1/10/2010.
- Return preparer standards revised retroactively to the 2007 Small Business Tax Act.
- Expanded broker basis reporting required beginning in 2011.
Note: This is not a complete list of all the provisions in the Act. Please give us a call to discuss an item in greater depth or to inquire about an item not on this list.
Disclaimer: This document represents a general overview of recent tax developments and should not be relied upon without an independent, professional analysis of how any of these provisions may apply to your specific situation. Any tax information contained in the body of this narrative was not intended or written to be used, and cannot be used, by the recipient for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code or provisions of applicable state or local law.