All taxpayers will bear the burden of the new $700 billion Emergency Economic Stabilization Act of 2008. But millions of taxpayers also stand to benefit from one or more of those provisions included at the last minute to ensure the bill's passage. Many are in the form of tax credits. That means they're subtracted from the tax you owe, leading to bigger tax savings than if they were deducted from your income. Here are highlights:
Renewable energy and conservation
•A new tax credit ranging from $2,500 to $7,500 for purchasers of plug-in electric-drive vehicles.
•A new tax credit of up to $4,000 for homeowners investing in wind power, and up to $2,000 for investments in geothermal heat pumps.
•A one-year extension of the tax credit of up to $500 for homeowners investing in energy-efficient improvements, including windows, doors, and heating systems. The catch here is that the extension is good for 2009, but doesn't include 2008.
•Expansion of the tax credit for homeowners investing in solar electricity, through 2016. Current law says you can only claim a credit for 30 percent of what you paid, up to an annual cap of $2,000. Starting next year, there's no cap. A $10,000 investment in solar electricity would yield a credit of $3,000, versus $2,000 today, according to Mark Luscombe, tax analyst for CCH, a tax information provider.
There's also a new tax exemption for employers providing fringe benefits for workers who commute to work by bicycle.
Extension of expired tax provisions
The following provisions, which had expired or had been set to expire, have been extended for 2008:
•Deduction for state and local sales taxes--a boon for residents of states with no sales tax
•Deduction for qualified tuition and related expenses
•Teachers' credits of $250 per person for out-of-pocket educational expenses
•Additional standard deduction for real-estate taxes
•Tax-free distributions from IRAs for charitable contributions up to $100,000, for folks age 70 1/2 and older.
Congress once again enacted a "patch" to the Alternative Minimum Tax, sparing millions of people from this dreaded alternative taxation system. The fix raises the exemption from the AMT to $46,200 in adjusted gross income for individuals, up from $44,350; $69,950 for couples filing jointly, up from $66,250. The exemptions are intended to track inflation, which has been higher in 2008 than in recent years.
Lower "floor" for child tax credit
Families earning as little as $8,500 are now eligible for the refundable child tax credit. The prior minimum income for eligibility was $12,050.
There's lots more, including temporary tax relief for victims of Hurricane Ike and of this year's Midwest storms. Indeeed, it appears that nearly every demographic group, from fishermen to manufacturers of wooden arrows, got a little bit of sugar in this law. How bitter it'll taste to pay for it all, however, is a story for another day.