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Income Tax Breaks in the Bailout Bill

Written by Nickel - 5 Comments

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Lost in all the hubbub about the $700B bailout bill was a series of income tax breaks for individuals. While a number of these won’t have any impact on the majority of Americans, they’re still worth knowing about just in case…

  1. An AMT fix. The alternative minimum tax (AMT) is the bane of the upper middle class tax filer’s existence. Without an annual patch, and every-increasing fraction of Americans would get snagged. The bailout included just such a fix for tax year 2008.
  2. Mortgage debt forgiveness. Congress recently passed a law saying that if you sell your home for less than you owe, restructure your mortgage, or get foreclosed on, the cancelled mortgage debt won’t count as income through 2009. This has now been extended to 2012.
  3. A break on education. You can now deduct up to $4k in school tuition if your AGI is $80k or less for single filers ($160k or less for joint filers).
  4. A sales tax deduction. The option to deduct stat and local sales tax instead of state income tax was extended.
  5. Tax-free donations. If you’re at least 70-1/2 years old, you can withdraw up to $100k from an IRA and give it to a charity tax-free.
  6. Energy tax credits. In 2009, you can get a credit of up to $500 for energy-efficient home improvements such as adding insulation or replacing windows.

Source: Money Magazine

Published on December 12th, 2008 - 5 Comments
Filed under: Taxes

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Comments (scroll down to add your own):

  1. Can this mortgage debt passage be clarified? I negotiated settlement of the 2nd on my condo after I was 120 days late; so are they not going to 1099 me?

    Comment by Anonymous — Dec 12th 2008 @ 10:57 am
  2. I have another question about this mortgage debt part… does it mean that you NEVER have to claim the income or just that it is delayed until 2012?

    Comment by Anonymous — Dec 12th 2008 @ 3:08 pm
  3. From what I read and heard on the mortgage forgiveness is you do not have to pay income taxes on the difference of the adjusted amount if this up until 2012.

    Comment by Anonymous — Dec 12th 2008 @ 10:55 pm
  4. Thanks for the information. That tuition one will help us out. I know we had more than $4000 in education expenses this year (ouch).

    Comment by Anonymous — Dec 14th 2008 @ 11:26 pm
  5. Good tips!
    is the $4k education a deduction or a tax credit?
    if it’s a deduction, you save almost $1000 in taxes (i’m in the 25% bracket), but if it’s a tax credit, that would be awesome…..(which I doubt it is)

    my understanding is, you can either take this or the learned/hope credit, correct? but not both.

    Comment by Anonymous — Dec 15th 2008 @ 10:18 am

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