Spotlight On...Tax Changes (2nd of 3)

As I disclosed in January, I’m pleased to introduce a new column in the monthly newsletter. “Spotlight On...” will focus on our neighbors and small businesses, but per request, it will first look at tax changes affecting homeowners for its articles in February, March and April.

In May, we’ll start spotlighting a member of the community for this regular column. These are people and businesses making a difference at school, home or in the community.

Economic Stimulus Act of 2008 (HR 5140)
Although I have published information regarding rebate checks before, it is still the most frequently asked question I get regarding finances! This Spotlight will just hit the bullet points:

Rebate Amounts:
* $600 ($1,200 for joint returns)
* Net income tax liability if lower than $600, but not less than $300 ($600 for joint returns)
* Rebate increased by $300 for each qualifying child (generally, a child that qualifies for the Child Tax Credit)
* If you're disabled or get veterans benefits and are normally exempt from income taxes, you will get $300 ($600 for joint returns) - see below that you MUST file a 2007 return to get the checks, even if you are not required to.
* Fully refundable

Eligibility:
You must have either of the following:
* Qualifying income of at least $3,000 (qualifying income is defined as earned income, social security benefits, and/or disability benefits paid to veterans and surviving spouses).
* Net income tax liability of at least $1 and gross income that is more than the applicable standard deduction + 1 exemption amount (2 exemptions for Married Filing Jointly). Generally, net income tax liability is the regular tax + AMT (if any) less allowable credits other than the Child Tax Credit and refundable credits, such as the Earned Income Credit.
* The act does not apply to nonresident aliens, individuals who could be claimed as dependents, individuals who do not have valid SSNs, and estates and trusts.
* To get a rebate check, you MUST file a return for the 2007 Tax Year.

Phaseout:
* The rebate is reduced by 5% of adjusted gross income exceeding $75,000 ($150,000 for joint returns). * So for taxpayers without children, the maximum rebate is fully phased out at $87,000 ($174,000 for joint returns).

If you own a business and deduct large purchases under Section 179 as part of that, that deduction has increased to $250,000 (phaseout to start at $800,000) for 2008 (amounts would have been $128,000 and $510,000, respectively). In addition, There will be a 50% bonus depreciation for property placed in service in 2008. Both provisions apply to 2008 only.

Checks should begin to go out in May and should be all distribtued by December 2008. Let's hope we're one of the early ones!

I know a lot of you are thinking about using some of this money for down payments on your next home. Please contact me at changhomes@gmail.com to make sure we have an appropriate strategy between the deposits, downpayments and the loan!

Source: H&R Block
For additional details regarding the stimulus bill, please see my post at http://changhomesnews.blogspot.com/2008/02/special-economic-stimulus-bill-awaits.html