By Mark E. Battersby

 

Talk about last minute tax law changes.

 

Congress passed and 90 minutes later, President Bush signed into law an historic rescue bill that could ultimately affect you and your practice. 

 

The Emergency Economic Stabilization Act of 2008 (EESA), which was developed to solve the credit crunch in the financial markets, will serve as one of the largest tax bills in recent years.

 

Included as part of the bill was almost 300 changes to our tax laws, which are expected to save taxpayers as much as $150 billion. The new law includes an alternative minimum tax (AMT) “patch” — an extensive package of tax extenders, energy incentives, and disaster relief.

 

More than 30 tax breaks that either expired after 2007 or are expiring soon have been extended thanks to the EESA. While not all of these tax breaks benefit you or your practice, here are a few that do. 

 

The bill boosts the AMT exemption amounts for individuals, while also allowing — at least for 2008 — personal nonrefundable credits to offset AMT and regular tax.

 

The bill also increases the threshold where people might begin to feel the effects of the AMT on their income. Although originally designed to prevent the wealthy from avoiding paying taxes, it has affected an increasing number of middle-class taxpayers. 

 

Currently, a taxpayer receives an exemption of $33,750 if filed as an individual and $45,000 if married filing jointly under the AMT. To hold the number of taxpayers subject to the AMT at bay, Congress has increased the exemption amounts for 2008 to $46,200 for individuals and $69,950 if married filing jointly. The provision also allows personal credits against the AMT with savings estimated at $62 billion over 10 years. 

 

Earlier tax law changes shortened the cost-recovery period for improvements made to property leased by a chiropractic practice or business from 39 years to 15 years. The new law not only extends that tax break to the end of 2009, but it allows retail businesses and new restaurants to benefit from a similarly shortened recovery period. The estimated savings from this provision is $8.7 billion over 10 years.

 

Similarly, Congress authorized a 15-year recovery period for depreciation of certain improvements to retail space. Even better, the write-off applies to owner-occupied practices and businesses, as well as leased establishments.

 

The new law extends a number of energy tax incentives. Many also go beyond the one- or two- year periods authorized by lawmakers for nonenergy extenders.

 

 Included in the  renewable energy incentives is an eight-year extension of the tax credits allowed for solar or alternative energy spending

made by a practice or business. 

 

In addition to tax credits, there is also a unique tax deduction available to anyone making a commercial building more energy efficient.

Under EESA, tax deductions for energy efficient buildings were extended through 2013 and are expected to generate tax savings in excess of $890 million over a 10-year period. 

 

Rather than provide a deduction for the cost of equipment or improvements needed to make a commercial building more energy efficient, the bill allows a deductible  of up to $1.80 per square foot for buildings looking to achieve 50 percent savings on energy. 

 

The energy savings must be accomplished through energy and power cost reductions for the building’s heating, cooling, ventilation, hot water, and interior lighting systems. 

 

Reduced deductions are also available for chiropractors and practices achieving smaller energy efficiencies in their commercial buildings.

 

In today’s credit crunch, extension of the New Markets Tax Credit may help you secure financing that otherwise might not be available. It is one of the few incentives that encourages taxpayers to invest in or make loans to small businesses in economically distressed areas.

The New Market Tax Credit was extended through 2009 and is expected to generate $1.3 billion in savings over 10 years. 

 

EESA also establishes a unique new fringe benefit for bicyclist commuters. Under the new law, employers can provide employees who commute to work by bicycle limited fringe benefits to offset the costs of such commuting, such as storage. That means tax free to the recipient and tax deductible by the chiropractic practice.

 

Many of the temporary provisions enacted as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) may be extended.

 

For example: The lower individual marginal income tax rates and relief of the marriage penalty and the federal estate tax will expire after 2010. Additionally, lower capital gains and dividend tax rates will sunset within the next few years.

 

Fortunately, most of the expected outlay from the EESA occurs in the 2008 and 2009 tax years. Consequently, tax planning becomes urgent for you, your practice, and other businesses wanting to take full advantage of these new, temporary tax breaks. 

 

Remember, however, professional guidance is strongly recommended. 

 

 

DISCLAIMER: The author is not engaged in rendering tax, legal, or accounting advice. Please consult your professional advisor about issues related to your practice.