| American Recovery and Reinvestment Act of 2009 |
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*
MAKING WORK PAY CREDIT. A tax credit is
provided for working Americans
of up to $400 for singles and $800 for couples. The credit phases out
for
single taxpayers with adjusted gross income (AGI) over $75,000 and for
married
couples with AGI over $150,000. *
$250 PAYMENTS FOR SOME. A one-time payment of
$250 will be made to
social security recipients, railroad retirees, disabled veterans, and
certain
other fixed-income groups. *
FIRST-TIME HOMEBUYER CREDIT. Those who buy a
first home from January 1,
2009, through November 30, 2009, may be eligible for a refundable tax
credit of
10% of the home’s purchase price up to a maximum credit of $8,000. If
the
taxpayer lives in the home for at least three years, no repayment of
the credit
is required. The credit phases out for single taxpayers with an AGI
over
$75,000 and for marrieds with an AGI over $150,000. *
NEW CAR DEDUCTION. Taxpayers who purchase a
new vehicle from February
17, 2009, through December 31, 2009, may take an above-the-line tax
deduction
for all state and local taxes attributable to the first $49,500 of the
purchase
price. The deduction is subject to phase-out for singles with AGI
exceeding
$125,000 and marrieds with AGI exceeding $250,000. *
EDUCATION CREDIT. The Hope education credit is
enhanced for 2009 and
2010. Renamed the “American Opportunity Tax Credit,” the credit is
increased
from $1,800 to $2,500 and applies to all four years of college, not
just two.
40% of the credit is refundable, and income limits apply. *
ALTERNATIVE MINIMUM TAX. An early “patch” to
the 2009 alternative
minimum income tax is included in the law, saving some 26 million
middle-income
taxpayers from being hit by a tax originally designed to keep the
wealthy from
escaping taxes. The 2009 AMT exemption amounts are $70,950 for joint
filers and
$46,700 for single filers. The law also extends the use of certain
personal
credits to offset AMT liability for 2009. *
ENERGY INCENTIVES. Among the various energy
incentives in the new law is
an increase in the tax credit for residential energy improvements, such
as
installing insulation, energy-efficient windows, and other
energy-savers. *
UNEMPLOYMENT BENEFITS. Unemployment
compensation is usually included in
income, but for 2009 up to $2,400 of benefits are excluded from income
for tax
purposes. Unemployment benefits above $2,400 are subject to tax. *
BONUS DEPRECIATION. First-year 50% bonus
depreciation for new business
equipment purchases is extended through 2009 (through 2010 for certain
other
property). *
INCREASED EXPENSING. Code Section 179
first-year expensing of new and
used business equipment purchases is extended through 2009 at the
higher limit
of $250,000. The deduction is reduced once purchases for the year
exceed
$800,000. *
LOSS CARRYBACK PERIOD. The new law allows
businesses with average gross
receipts of $15 million or less to carry back net operating losses for
up to
five years, rather than the normal two years. The longer carryback
period
applies only to losses incurred in a tax year beginning or ending in
2008. *
WORK OPPORTUNITY TAX CREDIT. Two new
categories of targeted groups are
eligible for the work opportunity tax credit: unemployed veterans and
disconnected
youth. The credit applies to workers in these groups hired in 2009 and
2010. *
COBRA BENEFITS. Employees who lose their jobs
between September 1, 2008,
and January 1, 2010, may elect to pay 35% of their COBRA coverage and
have that
treated as paying the full amount. The former employer is required to
pay the
remaining 65% and will be credited for this amount against income tax
withholding and payroll taxes otherwise payable to the federal
government.
Income and other limitations on COBRA coverage apply. The
new law is a massive
1,000 page document, so this quick review by no means covers all the
provisions
that may affect you. For guidance in your personal and business tax
planning
under this latest law, contact our office. |