American Recovery and Reinvestment Act of 2009 Highlights

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“Making Work Pay” Tax Credit

• • For 2009 and 2010 the law provides a refundable tax credit of up to $400 for working individuals and $800 for working families
  • The credit is calculated at a rate of 6.2% of earned income. It phases out for tax payers with gross income in excess of $75,000 for individuals or $150,000 for married couples filing jointly
  • Most qualifying taxpayers will automatically start receiving this credit in their paychecks no later than April 1, 2009, as a result of the new withholding tables

 

Economic Recovery Payment to Retirees

• • For recipients of Social Security and SSI the law provides a one-time payment of $250

 

Refundable Credit for Certain Federal and State Pensioners

• • For certain government retirees who are not eligible for Social Security benefits, the law provides a one-time payment of $250

 

Earned Income Tax Credit Increase

• • The law increases the earned income tax credit to 45% (previously 40%) of the family’s first $12,570 of earned income for families with three or more children

 

Child Tax Credit Increase

• • For 2009 and 2010 the refundable Child Tax Credit eligibility is increased – the earned income threshold is lowered to $3,000 from 2008’s threshold of $8,500

 

Education Tax Credit – The “American Opportunity”

• • For 2009 and 2010 the law creates a tax credit of $2,500 for cost of tuition and related expenses paid during the tax year
  • The tax credit is comprised of 100% of the first $2,000 and 25% of the next $2,000 of tuition and related expenses
  • 40% of the credit is refundable
  • Temporarily replaces the Hope credit for education

 

First Time Home Buyer Credit

• • The law eliminates the repayment obligation of the old law for homes purchased after January 1, 2009
  • The refundable tax credit increased to the maximum amount of $8,000
  • The prohibition on financing by mortgage revenue bonds has been removed
  • The credit is available for homes purchased before December 1, 2009

 

Sales Tax Deduction for New Vehicle Purchase

• • The law provides all taxpayers with a deduction for State, Local and Excise taxes paid on the purchase of new automobiles, as well as light trucks, recreational vehicles and motorcycles in 2009
  • The deduction phases out for taxpayers with adjusted gross income in excess of $125,000 for an individual or $250,000 for a joint return

 

Unemployment Benefits

• • The law suspends federal income tax on the first $2,400 of unemployment benefits received
    by taxpayers
  • Through December 31, 2009 the law provides for 33 weeks of extended unemployment benefits to workers who have exhausted their regular benefits
  • Weekly benefits are increased by an additional $25 through 2009

 

Health Insurance Assistance – COBRA

• • The law provides for an 65% subsidy for continuation of health insurance premiums
  • To qualify a taxpayer must be involuntarily terminated between September 1, 2008 and
    December 31, 2009
  • For those taxpayers who initially did not elect COBRA because it was unaffordable have an additional 60 days to make the election for COBRA

 

Energy Efficient Improvements Tax Credits to Existing Homes

• • The law increases the amount of tax credit to 30% of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements in 2009 and 2010
  • The law eliminates having a cap on each item and provides for a tax credit up to $1,500 on qualifying energy-efficient improvements made to existing homes for 2009 and 2010

 

Electric Drive Vehicle Credit

• • The law provides a tax credit for purchases of plug-in electric drive vehicles
  • Depending on battery capacity – the tax credit ranges from $2,500 to $7,500
  • The full amount of the allowable credit is available up to the end of the first calendar quarter in which the manufacturer records its 200,000th sale of the plug-in electric drive vehicle model

 

Home Energy Property

• • The law removes the dollar limitations on certain energy credits
  • Qualified small wind energy property – previously had a $4,000 cap for the tax credit
  • Qualified solar water heating property – previously had a $2,000 cap for the tax credit
  • Qualified geothermal heat pumps – previously had a $2,000 cap for the tax credit