The American Recovery and Reinvestment Act of 2009
Greetings!
On February 17, 2009, President Obama signed
into law the $787 billion American Recovery
and Reinvestment Act of 2009 (the 2009
"Stimulus Act").
The Act includes several provisions designed
to offer a degree of financial assistance to
individuals in the short and intermediate
term, including a one-time $250 Economic
Recovery Payment to individuals receiving
Social Security benefits, Railroad Retirement
benefits, Veteran's benefits, or Supplemental
Security Income (SSI) benefits. In addition,
up to $2,400 of unemployment compensation
benefits received in 2009 will be excluded
from gross income for federal income tax
purposes. And, for individuals who lose their
jobs on or after September
1, 2008, and before January 1, 2010, the Act
offers assistance in the form of subsidized
COBRA
premiums--those who qualify will have to pay
only 35% of the COBRA premiums needed to
continue their health coverage, for up to 9
months.
The Act also features new and modified tax
credits and deductions, including:
- A new "Making Work Pay Tax Credit" for
2009 and 2010 equal to 6.2% of earned income,
up to $400 ($800 in the case of a married
couple filing jointly); withholding schedules
will be adjusted to increase current
take-home pay to reflect the credit. The
credit is phased out for individuals with
modified adjusted gross income exceeding
$75,000 ($150,000 for married couples filing
jointly).
- A revised Hope education tax credit for
2009 and 2010, renamed as the American
Opportunity Tax Credit. With an increased
annual limit per student of $2,500, the
credit is now available for the first four
years of post-secondary education, and up to
40% of the credit is refundable. The credit
is phased out for individuals with modified
adjusted gross income exceeding $80,000
($160,000 for married couples filing
jointly).
- ·A revised first-time homebuyer tax
credit, extended to include qualifying home
purchases through November of 2009. The
maximum credit is increased to $8,000, and
the rules requiring that the credit be
repaid are waived for qualifying homes
purchased after December 31, 2008, and before
December 1, 2009, as long as the home
continues to serve as the individual's
principal residence for 36 months. The
credit continues to be phased out for
individuals with modified adjusted gross
income exceeding $75,000 ($150,000 for
married couples filing jointly).
- ·A new standard deduction for state sales
and excise tax related to the purchase of a
qualified motor vehicle after February 17,
2009 and before January 1, 2010. Individuals
who itemize deductions will claim the
deduction as part of state and local taxes
paid, reported on Schedule A of IRS Form
1040. The deduction is capped at the tax
attributable to a maximum purchase price of
$49,500, and is phased out for individuals
with modified adjusted gross income exceeding
$125,000 ($250,000 for married couples
filing jointly).
In addition, the Act increases the refundable
portion of the child tax credit, and makes
changes to the earned
income tax credit that benefit families with
three or more qualifying children, and
married couples filing joint returns. Also,
2008 provisions relating to the alternative
minimum tax (AMT), bonus first-year
depreciation, and IRC Section 179 expensing
were all extended through 2009.
Please advise us promptly if there are
ever any changes in your financial situation
or investment objectives. Feel free to give
us a call if you want to discuss anything
further.
Sincerely, Paula Harris and Bill Harris, CFP
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