Every year the president releases Fiscal Year Budget Proposals that are accompanied by the Treasury Department’s General Explanations of the Administration’s FY 2008 Revenue Proposals, also known as the Blue Book. This year’s Blue Book contains previously proposed tax measures as well as some new ones. This Blue Book presents nearly $2 trillion worth of tax break extensions over 10 years. Treasury's budget also calls for $410 million in additional funding for IRS compliance efforts for FY 2008.

AMT patch

The Alternative Minimum Tax is a separately figured tax that eliminates many deductions and credits, which increases the tax liability for an individual who would otherwise pay less tax. The original purpose for the AMT was to prevent the wealthy from avoiding federal taxation. Nowadays, it has become a burden to middle-class taxpayers.

The need for a permanent solution to the AMT’s affect upon middle-class taxpayers is not being addressed specifically in the FY 2008 Budget. However, a solution to the AMT's reach for tax year 2007 has been proposed in this year’s Blue Book. It proposes a one year extension of the AMT exemption amounts for 2007 to $43,900 for single and head of household filers, $65,350 for married taxpayers filing jointly and $32,675 for married taxpayers filing separately. That extension would keep the number of taxpayers subject to the AMT at about the same level as it was for the 2006 tax year.

Tax enforcement and administration

A brand new set of tax enforcement and administration initiatives form a major part of this year's Blue Book. The Bush Administration's FY2008 Budget proposes a total of 16 legislative changes to implement plans to close the tax gap, the difference between what taxpayers owe and what they pay. They include four broad initiatives that would: expand information reporting; improve compliance by business; strengthen tax administration; and expand penalties.

Health insurance

In the area of health care, the new standard deduction for health insurance (SDHI) ($15,000 for family coverage and $7,500 for single coverage) would replace all pre-tax employee health insurance benefits, both premium exclusions and flexible spending account contributions.

More tax breaks

Several proposals would make temporary tax breaks permanent or would extend them. The list includes permanently extending: the research and experimentation credit, tax-free withdrawals from IRAs for charitable contributions, the enhanced deduction for corporate contributions of computer equipment for educational purposes, increased limits on contributions of partial interests in real property for conservation purposes, the basis adjustment to stock of S corps contributing appreciated property, and the teacher’s classroom expense deduction.

If you have any questions about these proposals, please give our office a call.