Who Benefits Under the Economic Stimulus Plan of 2008
By
Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein, Rogoff, Olsen & Co., LLP
The new Economic Stimulus package will do little to turn around our current economy.
However, many individuals will welcome the additional handout from “Uncle Sam”.
The $150 billion stimulus package focused on three areas: Families, Business, and
Borrowers.
Benefits to the Family
Consumers reporting 2007 earned income of at least $3,000 with adjusted gross income
of less than $150,000 (joint couples) and $75,000 (single) will see rebate checks
of at ranging from $300 to $1,200, plus child rebates. The checks will be issued
even if the individual reports no tax liability. Individuals will also receive another
$300 rebate per child. The 2008 recovery rebate credit will be payable in the form
of an advance rebate check based on 2007 return numbers. Individuals missing out
on the 2008 credit, can have a second chance to qualify in for the credit in 2009
when they file their 2008 tax return.
Benefits to the Business
For capital expenditures made after January 1, 2008 and before January 1 2009, businesses
will see an increase in the ability to write off the cost of new equipment and software.
The package allows 50% depreciation on new equipment that is put into service during
the year rather than the 20% maximum. An additional 50% first year depreciation
will also be allowed on software. This tax provision effectively doubles the benefits
of an existing write off for small businesses. The bonus depreciation is not limited
to taxpayer income or the amount of capital expenditure during the year.
For tax years beginning in 2008, the Section 179 Deduction is also increased for
business with capital expenditures of $800,000 or less. Business will be permitted
to deduct up to $250,000 of purchases in 2008 and depreciate the balance over the
life of the asset (5 years for computers, 3 years for eligible software). The Section
179 deduction begins to phase out as capital expenditures exceed $800,000 and is
completely phased out when qualifying purchases exceed $1,050,000.
Luxury auto depreciate limits have also been raised from $3,060 and allow an additional
$8,000 bonus depreciation. Therefore, total first year depreciation on a luxury
auto is now $11,060 ($11,250 for vans or trucks).
Benefits to Borrowers
The plan allows Fannie Mae and Freddie Mac, for one year, to buy loans of up to
$729,750. The current limit is $417,000. The plan would also increase the $362,790
limit on loans insured by the Federal Housing Administration and make it easier
for borrowers to qualify. The net effect of the easing of credit is expected to
have little impact on California where the median existing home price is about $490,000.
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