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MAKING CENTS OUT OF THE NEWS
Blog #37
(September 23rd, 2009)
TOO- LITTLE-TOO-LATE BILL HAS LOTS OF SILVER LININGS
By Tom McAllister, CFP®
When it comes to the Obama Stimulus Bill, I've been fairly outspoken concerning my reservations about its effectiveness, either to-date or in future months. The program, officially called the American Recovery and Reinvestment Act of 2009, has so far spent only 14% of its available-to-be-borrowed funds.
While perhaps offering a needed psychological boost to the American public, my thought is that the Act will do little to hasten or enhance the coming economic recovery. In past years, similar governmental efforts, including those of the Roosevelt administration during the Great Depression, proved to be "too little, too late."
Happily, the current stimulus package created a number of benefits for small business owners and taxpayers that I believe are worth my clients' and blog readers' attention.
For Small Business Owners:
a. Equipment expensing: Up to $250,000 of equipment placed in service this year may be deducted in full, with 50% of additional costs allowed as bonus depreciation. The depreciation cap for vehicles has been raised to $8,000 per year.
b. Loss accounting: Businesses with less than $15 million of revenue may now "carry back" losses
for 3-5 years instead of just two, claiming appropriate refunds. Losses may also be carried forward for up to 20 years.
c. Capital Gains Exclusions: Investments in small business made between 2/17/09 and 1/1/2011 will be eligible for a 75% capital gains exclusion.
d. Corporate Status Changes: Switching from "C" Corporate status to "S" status can now be done under more favorable terms.
For Taxpayers:
AMT: The Alternative Minimum Tax has been "patched" again, allowing 26 million taxpayers to escape paying this tax. (A better alternative, in my opinion, would be to repeal the tax altogether.)
For Homeowners:
a. A 30% tax credit of up to $1,500 is available to homeowners who make energy-efficient improvements to their homes in 2009 and 2010.
b. First-time home buyers (the "first-time" category includes those who have not owned a home for the past three years) with incomes below $75,000 for individuals, $150,000 for couples, may claim a credit equal to 10% of the value of their home up to a maximum of $8,000. After three years, these credits are not recoverable by the IRS.
Note of caution: Consult your own tax advisors regarding the applicability of any of these benefits to your own circumstances. At McAllister Financial Planning, we do not render tax advice. Rather, we attempt to inform our readers of possible benefits they might be able to claim.
The American Recovery and Reinvestment Act of 2009 will prove, I suspect, to relate more to boosting morale than to boosting the economy. The tax breaks offered by the bill, however, could prove to be of very real benefit to many. As the old song says, "Look for the silver lining!"
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