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Key Tax Breaks in the Rescue Plan - New law extends expired tax provisions

The Emergency Economic Stabilization Act of 2008 was signed into law on October 3, 2008. This "rescue plan" authorizes the purchase of financial assets through a special government program. It also curbs excessive compensation for executives of financial firms and provides relief to some beleaguered homeowners.
Several tax provisions, including extensions of key tax breaks that had expired after 2007, were added to the legislation at the eleventh hour. Here is a brief rundown.
*The new law patches the alternative minimum tax (AMT) again. For 2008, the AMT exemption amount is increased to $69,950 for joint filers; $46,200 for single filers. The patch also allows taxpayers to claim nonrefundable personal credits to reduce their AMT liability.
*The "tuition deduction" is reinstated through 2009. It allows you to deduct up to $4,000 of qualified higher education expenses paid for yourself, your spouse or a dependent. However, the deduction is reduced to $2,000 for single filers with an adjusted gross income (AGI) above $65,000; $130,000 for joint filers. It disappears completely if AGI exceeds $80,000; $160,000 for joint filers.
*An individual can choose to deduct state and local sales tax in lieu of deducting state and local income taxes on his or her personal tax return. This tax break is extended through 2009.
*The new law also extends the new property tax deduction for nonitemizers for one more year. Initially authorized only for 2008, a deduction of up to $500 ($1,000 for joint filers) may be claimed by non-itemizers in addition to the standard deduction.
*An educator may deduct up to $250 of unreimbursed classroom expenses. This deduction is extended through 2009.
*Under the new law, taxpayers aged 701/2 or older may continue to take tax-free IRA withdrawals that are contributed to a qualified charitable organization. The maximum annual contribution remains at $100,000. This tax break is now available through 2009.
*The research credit is extended, with certain modifications, for qualified amounts paid or incurred in 2008 and 2009. The modifications include an increase in the alternative simplified credit and repeal of the alternative incremental credit.
*The new law enables taxpayers to write off certain leasehold and restaurant improvements over 15 years instead of the usual 39-year period. This tax break is available though 2009.
*The new law revives enhanced deductions for charitable donations by businesses of food, books and computers made in 2008 and 2009.
This is just an overview of the key tax provisions. More details are available upon request.

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