Much of the attention regarding the new “bailout bill” has focused on the $700 billion that the Federal Government will allow the US Treasury to use in order to stabilizing the financial system.
However, there were a lot of new tax laws that also found their way into the bill. 2008-emergency-economic-stabilization-act.pdf.
Here are some highlights:
* The rescue plan extends a temporary rule for cancellation of indebtedness income. When a lender forecloses on property, sells the home for less than the borrower’s outstanding mortgage and forgives all or part of the excess mortgage debt, the tax code treats the canceled debt as taxable income to the homeowner. The Mortgage Forgiveness Debt Relief Act, enacted in late 2007, excludes from federal tax those discharges involving up to $2 million of indebtedness ($1 million for a married taxpayer filing a separate return) secured by a principal residence and incurred in the acquisition, construction or substantial improvement of the residence. The new law extends this treatment from the end of 2009 through 2012.
* Congress included an alternative minimum tax (AMT) patch in the new law. Under the new law’s patch for the 2008 tax year, the AMT exemption amounts are $69,950 for married couples filing jointly and surviving spouses, $46,200 for single taxpayers and heads of household, and $34,975 for married couples filing separately for 2008.
* The new law extends through December 31, 2009, the above-the-line higher education tuition deduction. The deduction allows eligible taxpayers to deduct the costs of qualified higher education expenses paid during the year for themselves, a spouse, or a dependent.
* The new law extends several energy efficiency and energy property tax incentives. The Code Sec. 179D deduction for energy efficient commercial buildings is extended through December 31, 2013. The Code Sec. 25D residential energy efficient property credit is extended through December 31, 2016, along with adding incentives for residential small wind investment and geothermal heat pumps and authorizing taxpayers to use the credit to offset AMT. Congress also reinstated the Code Sec. 25C residential energy property credit for property placed in service in 2009. Additionally, Congress modified the energy efficient appliance credit for manufacturers of qualifying dishwashers, clothes washers, and refrigerators.