The American Recovery and Reinvestment Act of 2009 (26 USC 1001)

If you suffer from insomnia and would like to read the nearly 500 page bill you will find it at this link: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf Assuming you would prefer to have a good summary of the most common provisions effecting families, they are summarized below:

TAX RELIEF FOR INDIVIDUALS AND FAMILIES

Sec. 36A (26 USC 36A) “Making Work Pay” Tax Credit. For 2009 and 2010, the Act provides a refundable tax credit of up to $400 for working individuals and $800 for working families. This tax credit would be calculated at a rate of 6.2% of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns. Non-resident aliens with ITIN’s are not eligible.

Sec. 1002 (26 USC 1002) Increase in Earned Income Tax Credit. The Act temporarily increases the earned income tax credit for working families with three or more children. Under current law, working families with two or more children currently qualify for an earned income tax credit equal to forty percent (40%) of the family’s first $12,570 of earned income. This credit is subject to a phase-out for working families with adjusted gross income in excess of $16,420 ($19,540 for married couples filing jointly). The Act increases the earned income tax credit to forty-five percent (45%) of the family’s first $12,570 of earned income for families with three or more children and would increase the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) by $1,880.

Sec. 1003. Increase Refundable Portion of Child Credit. For 2008, the child tax credit is refundable to the extent of 15 percent of the taxpayer’s earned income in excess of $8,500. For 2009 and 2010 the Act reduce this floor to $3,000.

Sec. 1004. “American Opportunity” Education Tax Credit. The Act provides financial assistance for individuals seeking a college education. For 2009 and 2010, the Act amends the Hope Scholarship Credit by providing taxpayers with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 ($2,000-$4,000) of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. The credit extends beyond the current first two years of college and now goes through four years. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). The credit is also allowed against the alternative minimum tax. As a part of this Act the Secretary of Education is to study coordination with the Pell Grant program and the feasibility of requiring including community service as a condition of taking their tuition and related expenses into account under Sec. 25A of the Internal Revenue Code.

Sec. 1005. Computers as Qualified Education Expenses in 529 Education Plans. Section 529 Education Plans are tax-advantaged savings plans that cover all qualified education expenses, including: tuition, room & board, mandatory fees and books. The Act provides that computers and computer technology qualify as qualified education expenses in 2009 and 2010.

Sec. 1006. Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The Act eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase.

Sec. 1007. Temporary Suspension of Taxation of Unemployment Benefits. Under current law, all federal unemployment benefits are subject to taxation. The average unemployment benefit is approximately $300 per month. For 2009 the Act suspends federal income tax on the first $2,400 of unemployment benefits per recipient.

Sec. 1008. Additional Sales Tax Deduction for Vehicle Purchases. The Act provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles (motor homes), and motorcycles through 2009 which cost less than $49,500. This deduction is subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).
Extension of AMT Relief for 2009. The Act provides more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals.

Sec. 2201, 2202. Economic Recovery Payment to Recipients of Social Security, SSI, Federal and State Pensiioners, Railroad Retirement and Veterans Disability Compensation Benefits. The Act provides a one-time payment of $250 to government retirees not eligible for Social Security, retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration, Railroad Retirement beneficiaries, and disabled veterans receiving benefits from the U.S. Department of Veterans Affairs. The one-time payment is a reduction to any allowable Making Work Pay credit.

There are many other provisions which relate to government agencies, businesses, appropriations and departmental implimentation but these are the primary provisions effecting families. If you would like more information or have questions please contact us by e-mail at help@administerjustice.org.

Administer Justice is a charitable low-income legal and tax service provider. The low-income taxpayer clinic is designed to provide education in tax matters and intervention in disputes with the IRS.