December 10, 2009 in Nation/World

House votes to extend tax credits

Stephen Ohlemacher Associated Press
 

At a glance

Among the deductions and credits for businesses and individuals extended for one year in the bill passed by the House:

A sales tax deduction that mainly benefits people who live in the nine states without a state income tax. The states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming.

An additional standard deduction for state and local property taxes for taxpayers who don’t itemize their deductions.

A deduction of up to $4,000 for college tuition and related expenses.

A deduction of up to $250 for teachers who spend their own money for books and other classroom supplies.

A credit that helps businesses finance research and development.

Additional depreciation allowance for businesses that suffer damage from a federally declared disaster.

WASHINGTON – The House voted Wednesday to extend $31 billion in popular tax breaks, including an income tax deduction for sales and property taxes, to be financed with a tax increase on investment fund managers and a crackdown on international tax cheats.

The 45 tax deductions and credits for businesses and individuals are scheduled to expire at year’s end. The House voted 241-181 to extend them for a year. Rep. Walt Minnick, D-Idaho, voted for the measure; Rep. Cathy McMorris Rodgers, R-Wash., voted against it.

The bill now goes to the Senate, which has rejected the tax increase on investment managers in the past.

The tax breaks include a sales tax deduction that mainly helps people in the nine states – including Washington – without local income taxes, a property tax deduction for people who don’t itemize and lucrative credits that help businesses finance research and development.

The tax breaks are supported by Democrats and Republicans alike and are routinely extended each year, but there are big disagreements over the tax increases that would pay for them. The dispute, combined with the Senate’s prolonged debate on health care, makes it unclear whether the tax package will be enacted this year.

The House bill would raise $24.6 billion over the next decade from the tax increase on investment fund managers. It would affect hedge fund and private equity managers, as well as the more than 1.2 million real estate investment partnerships, according to the Real Estate Roundtable.

The House bill would raise an additional $7.7 billion from a crackdown on international tax cheats, an issue the Internal Revenue Service and the Obama administration have embraced.

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