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FOR IMMEDIATE RELEASE
American Recovery and Reinvestment Act of
2009 is signed into law
February 24, 2009 -- On February 17, President Obama
signed the American Recovery and Reinvestment Act of 2009, a $789 billion
package of tax breaks and spending programs designed to stimulate the
economy. The tax portion of the law makes over 300 changes to the tax
code. Here is an overview of the major tax provisions.
- MAKING WORK PAY CREDIT. A tax credit
is provided for working Americans of up to $400 for singles
and $800 for joint filers. 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 brief
overview by no means covers all the provisions. Please contact
our office for guidance and further explanation of how the
provisions of the Act may pertain to you, your company, your
associates, customers etc.
For More Information Contact:
Lohman Company, PLLC
Stapley Center
1630 South Stapley Drive, Suite 108
Mesa, AZ 85204
Phone: (480) 355-1100
Fax: (480) 355-1130
Internet:
info@lohmancompany.com
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