Thursday, December 10, 2009
House approves extending certain tax breaks for 1 year
Temporary tax breaks for businesses and individuals would be extended under a bill the House passed by a vote of 241 to 181 Wednesday. A permanent tax increase on the income of private-equity and hedge-fund managers, along with provisions aimed at curtailing offshore tax avoidance, would be used to offset the $31 billion cost for the tax breaks for research and development, overseas lending by U.S. banks and for refurbishments to restaurants and retail stores. Lawmakers warned, however, that some of the breaks could be eliminated as early as next year.http://online.wsj.com/article/SB126039125069884187.html?mod=dist_smartbrief
:: Expiring Tax Provisions ::
-- Sales Tax on Vehicle Purchases. This above-the-line deduction phases out at $125,000 singles and $250,000 married and expires on 12/31.
-- AMT Relief. Although relief may still be provided, estimated payments for 2010 cannot assume a further extension.
-- COBRA Assistance. The federal government 65% subsidy of COBRA premiums for employees who were involuntarily terminated between 9/1/08 and 12/31/09 will end, but payments continue for 9 months after termination and may continue into 2010.
-- Temporary Estimated Tax Relief for Small Businesses. For a tax year that begins in 2009, if an individual has adjusted gross income below $500,000 and more than 50% of that income comes from a small business, the individual will not incur a penalty for underestimating taxes if the payments made are equal to at least 90% of the tax liability for the year. For this provision a small business is defined as a business with fewer than 500 employees. As 2009 includes one more estimated payment in January, be aware that the 90% rule can help keep away from penalties for underestimating tax liability.
-- Small Business Expensing Rules will be lower in 2010. In the 2008 stimulus legislation, Congress increased the expensing provisions for small businesses to $250,000 for assets purchased in 2008, and increased the phase-out to businesses purchasing more than $800,000 in assets. The American Recovery and Reinvestment Act of 2009 extended the $250,000 limit for expensing until the end of 2009. After December 31st, the limit will go back to $125,000 with a phase-out for business that purchases more than $400,000 in assets. There's still time to purchase business assets and take the more generous 2009 Section 179 deduction.
-- AMT Relief. Although relief may still be provided, estimated payments for 2010 cannot assume a further extension.
-- COBRA Assistance. The federal government 65% subsidy of COBRA premiums for employees who were involuntarily terminated between 9/1/08 and 12/31/09 will end, but payments continue for 9 months after termination and may continue into 2010.
-- Temporary Estimated Tax Relief for Small Businesses. For a tax year that begins in 2009, if an individual has adjusted gross income below $500,000 and more than 50% of that income comes from a small business, the individual will not incur a penalty for underestimating taxes if the payments made are equal to at least 90% of the tax liability for the year. For this provision a small business is defined as a business with fewer than 500 employees. As 2009 includes one more estimated payment in January, be aware that the 90% rule can help keep away from penalties for underestimating tax liability.
-- Small Business Expensing Rules will be lower in 2010. In the 2008 stimulus legislation, Congress increased the expensing provisions for small businesses to $250,000 for assets purchased in 2008, and increased the phase-out to businesses purchasing more than $800,000 in assets. The American Recovery and Reinvestment Act of 2009 extended the $250,000 limit for expensing until the end of 2009. After December 31st, the limit will go back to $125,000 with a phase-out for business that purchases more than $400,000 in assets. There's still time to purchase business assets and take the more generous 2009 Section 179 deduction.
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