Be Prepared for Tax Changes in 2009
In recent days, President Obama has urged fast action on huge spending in response to the worst U.S. economic slide since the 1930s Great Depression. His proposed economic stimulus plan includes goals of doubling the production of alternative energy over three years, updating most federal buildings to improve energy efficiency, making medical records electronic, expanding broadband networks and updating schools and universities. His plan could cost as much as $775 billion over two years in tax cuts and spending intended to jolt the economy and create new jobs.
Though various tax and economic relief proposals were introduced in Congress at the end of 2008, most did not pass. Legislators did manage to pass a law authorizing seven more weeks of unemployment benefits for out-of-work individuals (13 more weeks of benefits for individuals in states where the unemployment rate is above 6%). In addition, on December 11, Congress did pass the Worker, Retiree, and Employer Recovery Act of 2008, an emergency pension tax relief bill. The bill suspends for 2009 the requirement that retirees aged 70½ and older must take a minimum annual distribution from their retirement plans. The bill also eases funding requirements for pension plans in an effort to help cash-strapped businesses.
A look at the tax relief provisions that failed to pass in late 2008 will give you an idea of changes that are very likely to occur in 2009 when President-elect Obama takes office. Two provisions likely to pass: an extension through 2009 of 50% bonus depreciation for the purchase of new business equipment and a $250,000 limit on first-year expensing for the purchase of new or used business equipment.
Obama plans to propose $310 billion in tax cuts for the middle class and businesses as part of the $775 billion stimulus plan. Some U.S. governors and economists are pushing for a larger package—around $1 trillion. Many Republicans want a more modest bill, possibly in the range of $500 billion. Regardless of the final form the stimulus package takes, stay tuned for what is likely to be a year with multiple changes to the tax code.
Make it a priority to contact us for tax guidance before you make important financial decisions this year.
Since the information contained on this website is of a general and summary nature, no final conclusion should be made without further review. For additional information, please contact us at 847-267-9600
