American Recovery and
Reinvestment Act of 2009
The Recovery and
Your Family
Small Business/Self-Employed Division
Date
“Making Work Pay” Tax
Credit
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Will cut taxes for working families
Up to $400 ($800 if MFJ)
Refundable
Phase out for taxpayers with modified AGI >
$75,000 ($150,000 MFJ)
• Claim credit on 2009 tax return
• Tax withholding decrease (begin by 4/1/2009) to
anticipate credit
• Revised Form W-4 not necessary for automatic
withholding change
New Withholding Tables
Caution: Avoid Being Under Withheld
• Employee with multiple jobs or married couples
whose combined incomes place them in higher
tax brackets may elect to submit a revised Form
W-4
• Ensure enough withholding is held to cover the
tax on combined income
• Obtain Publication 919, How Do I Adjust My Tax
Withholding?
• Use the “Withholding Calculator” on IRS.gov
Making Work Pay - Example of new
withholding tables: two jobs
• Jan – March: 13 weeks X $17 = $221
withholding (old tables)
• April – Dec: 39 weeks X $8 = $312 withholding
(new tables)
• Withholding for Job #1: $533
• Withholding for Job #2 is the same: $533
• Total projected withholding: $1,066
• Total projected tax liability: $2,280
• Balance due: $1,214
Making Work Pay - Example of new
withholding tables: one job
• Jan – March: 13 weeks X $17 = $221
withholding
• April – Dec: 39 weeks X $8 = $312
withholding
• Total projected withholding: $533
• Tax Liability: $165
• Total projected refund due: $368
Important Message
• Taxpayers that have more than one job at the
same time are at risk for being under withheld,
since they are entitled to only one credit
• Taxpayers who are married with both spouses
working may also be under withheld
• Combined income from two jobs or spouses who
both work put taxpayers in a higher tax bracket
• Pension recipients with no earned income are
not eligible for the Making Work Pay Credit and
may be under withheld
Economic Recovery
Payment
• SS, SSI, RR, Veterans Disability
Recipients
• $250 – one-time payment (not from IRS)
• Reduces “Making Work Pay” Credit, if
eligible
• No phase out
• Not income for income tax purposes
• Contact respective agency for more
information
Credit for Certain Government
Federal and State Retirees
• Certain government retirees will receive a
one time $250 refundable credit on their
2009 tax return filed in 2010
• For government retirees who receive a
pension from work not covered by Social
Security
Earned Income Tax Credit
(EITC) Increase
• New credit percentage for 3 or more
qualifying children
• Maximum credit increase = $5,028 to
$5,657
• Maximum AGI increase = $43,415 to
$48,279
Child Tax Credit
• $1,000 per qualifying child
• Refundable portion – eligibility increased
• More lower income families qualify:
– 2008 – threshold amount = $8,500
– 2009 – threshold amount = $3,000
– 2010 – threshold amount = $3,000
“American Opportunity”
Education Tax Credit
• Expands HOPE Credit – available for first
4 years of post-secondary education
• For 2009 and 2010 maximum credit is
$2,500
• 40% refundable
• Phase out for taxpayers with modified AGI
> $80,000 ($160,000 MFJ)
First-Time Homebuyer
Credit Amended
• Increased to $8,000
• Refundable
• Homes purchased from 1/1/2009 through
11/30/2009
• No repayment (must live in home 3 years)
• Can choose to claim on 2008 return
• Phase out for taxpayers with modified AGI
> $75,000 ($150,000 MFJ)
Portion of Unemployment
Benefits are Nontaxable
• Temporary suspension of the federal
income tax on first $2,400 of
unemployment compensation
• Unemployment compensation over $2,400
will be subject to federal income tax
• Any requested withholding on
unemployment compensation will continue
to apply to the full amount paid.
Energy Conservation
Incentives
Federal Tax Credits for Energy
Efficiency includes:
– Tax credits are available at 30% of the
cost, up to $1,500, in 2009 & 2010 (for
existing homes only) for:
• Windows and doors, insulation, roofs (metal
and asphalt), HVAC, water heaters (non
solar), biomass stoves
Sales Tax Deduction
on New Vehicles
• State, local & excise taxes paid in 2009
• Cars, light trucks, motor homes,
motorcycles
• Purchases after 2/16/2009
• Taxes paid on first $49,500 of cost
• Phase out for taxpayers with modified AGI
> $125,000 ($250,000 MFJ)
• Do not have to itemize to take deduction
More Information
• Go to www.irs.gov
• Check Web site frequently for the
latest updates