Here you can learn more about the American Recovery and Reinvestment Act of 2009. It may affect you in several ways, specifically when it comes to your 2009 taxes. Scroll down to learn more about:
Making Work Pay Credit
Pensioners
Social Security Recipients, Veterans, and Railroad Retirees Payment
First Time Homebuyer's Credit
Changes to the Earned Income Tax Credit
Changes to the Child Tax Credit
American Opportunity Tax Credit
Making Work Pay Credit
For 2009 and 2010, the Making Work Pay provision of ARRA will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. For taxpayers who receive a paycheck and are subject to income tax withholding, the benefit of the credit will typically be received through an automated reduction of income tax withholding by the employer, beginning in early Spring. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 and 2010 tax returns.
Employees do not have to submit a new Form W-4 to get the automatic withholding change. However some employees may not want their withholding reduced. Taxpayers who have more than one job or married couples whose combined income places them in a higher tax bracket may elect to submit a revised W-4 to make sure they have enough income tax withheld. For more information on this topic please visit this IRS article.
Pensioners
If you are collecting on a pension and do not receive any wages you will not be Eligible for the Making Work Pay Credit. However the amount of withholding on your pension may have been reduced automatically regardless. This might result in you owing money come tax season. If you think this might be the case with your pension contact your pension administrator. If desired you can adjust your withholding by completing a W-4P and giving it to your pension administrator. This form can be found here. More information on this topic can be found here, under the section labeled "Pensioners."
Social Security Recipients, Veterans and Railroad Retirees
A one-time economic recovery payment of $250 will be made in 2009 to recipients of certain benefits administered by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board. You do not have to file a tax return to get your economic recovery payment! Individuals who may qualify for the economic recovery payment should contact their respective agency for more information. This one-time payment is a reduction to any Making Work Pay credit.
For more detailed information on this one time payment please go to the following sites:
Social Security Recipients
Veterans
Railroad Retirees
First-time Homebuyer Credit Amended for 2009
This provision continues the homebuyer credit for qualifying home purchases before December 1, 2009. For purchases in 2009 taxpayers can qualify for a refundable credit of up to $8000 and generally do not have to repay the credit for home purchases after December 31, 2008 and before December 1, 2009.
Taxpayers can elect to take this credit on their 2008 tax return, even if the home was bought in 2009. They can also choose to wait and take the credit on their 2009 tax return.
Homes purchased on or after April 9, 2008 and before January 1, 2009 are still governed by the original first-time homebuyer credit of last year. This credit is limited to $7500 and must be repayed.
For more information on this credit please go here.
Buyers eligible for this credit who apply for mortgages insured by the FHA may be eligible for bridge loans or cash advances, up to $8,000, that may be used for down payment, closing costs or other loan expenses pending receipt of their tax credit from the IRS. For more information on this topic please go here.
Changes to the Earned Income Tax Credit
The Earned Income Tax Credit has been expanded to allow families with three or more children to receive more money. The maximum credit for families with three or more children has been increased to $5,657, compared to $5,028 last year. The credit is now larger at each income level for families with three children compared to just two children.
Married couples who haven't received the credit in the past, may now be eligible. The credit is now available to married couples over a wider income range.
More detailed information can be found here.
Changes to the Child Tax Credit
The child tax credit has been expanded to allow people with very low income to claim a refundable portion of the credit. In the past, people who made less than $8,500 could not get any portion of the child tax credit refunded to them. However for 2009 this number has been changed to $3,000 allowing for more people to take advantage of this credit.
Additional information can be found here.
American Opportunity Tax Credit
This credit will take the place of what was known as the Hope Credit. It will increase the maximum credit to $2,500. The credit will also now be partially refundable, meaning if you don't have any tax liability you still may receive a portion of the credit. You may also now use this on all four years of post-secondary education, while previously it had been limited to the first two. Course materials can now be counted as qualifying expenses and the credit phases out at a much higher income of around $85,000 for single filers and $170,000 for joint returns.
More information can be found here.
For more information on the American Recovery and Reinvestment Act visit recovery.gov or click on the picture below.
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