RBZ Tax Alert eNews: The American Recovery and Reinvestment Act of 2009 (ARRA)


The American Recovery and Reinvestment Act of 2009 (ARRA) The much anticipated economic stimulus package has been passed by the House and Senate and signed into law by the President. The stimulus package contains nearly $300B in tax relief. Given the voluminous nature of this bill, we would like to provide you with an overview of the most important provisions. For a more detailed explanation about the provisions of the package, please call us. Selected Business Incentives Bonus depreciation – 50% first-year bonus depreciation provisions are extended through December 31, 2009. Small business expensing – active businesses can expense up to $250,000 spent on equipment, software and furniture through December 31, 2009. Certain limitations apply. Net operating loss carryback – qualified small businesses with average gross receipts of $15M or less can carry their 2008 net operating losses back five years. Cancellation of indebtedness – this provision allows certain businesses to elect to recognize cancellation of indebtedness income over five years for certain business debt repurchased by the business after December 31, 2008, and before January 1, 2011. S-Corporation built-in gain period is temporarily shortened from 10 to 7 years – this provision applies to S-Corporations that were C-Corporations prior to electing the “S” status. Selected Energy Incentives The Residential Energy Property Credit is increased to $1,500 per year for eligible property placed in service after December 31, 2008 and before January 1, 2011. Eligible property includes insulation materials, exterior doors and windows, central AC units, hot water boilers, electric heat pump water heaters, certain metal roofs, stoves, etc. Individual dollar caps for solar hot water property, geothermal heat pumps and wind energy property have been removed. Selected Individual Incentives The Making Work Pay credit allows a credit against income tax in an amount equal to the lesser of 6.2% or the individual’s earned income or $400 ($800 for married joint filers). The credit is phased out if your income exceeds $75,000 ($150,000 for married joint filers). The 2009 AMT exemption has been slightly increased. First-Time Homebuyer Tax Credit – $8,000 for first time homebuyers who purchased their homes between January 1 and November 30, 2009. This benefit starts to phase out at $75,000 for single and at $150,000 for joint filers. Deduction for state and local sales taxes or excise taxes for purchase of a new car – this deduction is not subject to AMT and is available to taxpayers whether they itemize their deductions or not. This benefit starts to phase out at $125,000 ($250,000 for joint filers). HOPE education credit temporarily enhanced to $2,500 per year – this benefit starts to phase out at $80,000 ($160,000 joint filers). If you have any questions about the ARAA, please contact your RBZ representative or other appropriate advisor. We would be glad to answer any questions you may have. RBZ, LLP is one of the largest public accounting and strategic consulting firms in Los Angeles and has been providing tax services for over 33 years. We are located at 11755 Wilshire Blvd., Ninth Floor, Los Angeles, CA 90025. Phone: 310.478.4148 \| Fax: 310.312.0358 \| Web site: www.rbz.com

The American Recovery and Reinvestment Act of 2009 (ARRA)

The much anticipated economic stimulus package has been passed by the House and Senate and signed into law by the President. The stimulus package contains nearly $300B in tax relief. Given the voluminous nature of this bill, we would like to provide you with an overview of the most important provisions. For a more detailed explanation about the provisions of the package, please call us.

Selected Business Incentives

Bonus depreciation – 50% first-year bonus depreciation provisions are extended through December 31, 2009.
Small business expensing – active businesses can expense up to $250,000 spent on equipment, software and furniture through December 31, 2009. Certain limitations apply.
Net operating loss carryback – qualified small businesses with average gross receipts of $15M or less can carry their 2008 net operating losses back five years.
Cancellation of indebtedness – this provision allows certain businesses to elect to recognize cancellation of indebtedness income over five years for certain business debt repurchased by the business after December 31, 2008, and before January 1, 2011.
S-Corporation built-in gain period is temporarily shortened from 10 to 7 years – this provision applies to S-Corporations that were C-Corporations prior to electing the “S” status.

Selected Energy Incentives

The Residential Energy Property Credit is increased to $1,500 per year for eligible property placed in service after December 31, 2008 and before January 1, 2011. Eligible property includes insulation materials, exterior doors and windows, central AC units, hot water boilers, electric heat pump water heaters, certain metal roofs, stoves, etc. Individual dollar caps for solar hot water property, geothermal heat pumps and wind energy property have been removed.

Selected Individual Incentives

The Making Work Pay credit allows a credit against income tax in an amount equal to the lesser of 6.2% or the individual’s earned income or $400 ($800 for married joint filers). The credit is phased out if your income exceeds $75,000 ($150,000 for married joint filers).
The 2009 AMT exemption has been slightly increased.
First-Time Homebuyer Tax Credit – $8,000 for first time homebuyers who purchased their homes between January 1 and November 30, 2009. This benefit starts to phase out at $75,000 for single and at $150,000 for joint filers.
Deduction for state and local sales taxes or excise taxes for purchase of a new car – this deduction is not subject to AMT and is available to taxpayers whether they itemize their deductions or not. This benefit starts to phase out at $125,000 ($250,000 for joint filers).
HOPE education credit temporarily enhanced to $2,500 per year – this benefit starts to phase out at $80,000 ($160,000 joint filers).

If you have any questions about the ARAA, please contact your RBZ representative or other appropriate advisor. We would be glad to answer any questions you may have.

RBZ, LLP is one of the largest public accounting and strategic consulting firms in Los Angeles and has been providing tax services for over 33 years. We are located at 11755 Wilshire Blvd., Ninth Floor, Los Angeles, CA 90025.

Phone: 310.478.4148 | Fax: 310.312.0358 | Web site: www.rbz.com