The American Recovery and Reinvestment Act of 2009 is a complex piece of legislation with numerous tax provisions. Among the highlights are help for the unemployed, first-time homebuyers, Social Security recipients, and taxpayers. What does this act mean to you?
Well, for starters it may mean tax relief. While many of the tax provisions are narrow in their scope, the provisions are plentiful.
Tax relief for the unemployed
No doubt, the recession is hard on many. It can be especially hard on those who are unemployed. And to make matters worse, unemployment benefits are taxable. The American Recovery and Reinvestment Act of 2009 reduces the tax burden by waiving the income tax on the first $2400 of unemployment benefits.
Tax relief for health care costs
In addition, COBRA, a health insurance continuation program, has been subsidized. Qualified workers may be eligible for 65% COBRA subsidy for up to nine months.
COBRA has been traditionally cost-prohibitive and many unemployed workers opted out of the program due to the high cost. With this subsidy, continuing health insurance may become dramatically more affordable.
Tax relief for first-time homebuyers
Home prices have fallen dramatically due to the housing decline, making right now an excellent time for first-time homebuyers to buy an affordable first home. For those who qualify, a tax credit of up to $8,000 may be available for homes purchased before December 1, 2009. The 2009 tax credit does not need to be repaid over time.
For homeowners who purchased their first home in 2008, a tax credit up to $7,500 may be available. However, this credit may have to be paid back over a specified period of time.
Tax relief for Social Security recipients, disabled veterans, and railroad retirees
Social Security recipients, disabled veterans, and railroad retirees may be eligible to receive a one-time $250 payment under the American Recovery and Reinvestment Act of 2009.
This is not an automatic payment. Those who qualify must contact the appropriate agency and apply for this payment. In addition, this payment reduces the "Make Work Pay" credit if the recipient also qualifies for it.
Tax relief for taxpayers
The Make Work Pay tax credit may increase the take-home pay of some workers in America for the tax years 2009 and 2010. Up to $400 for individuals and $800 for married filers is at stake. This tax credit is phased out at income levels of $75,000 for individuals and $150,000 for married filers.
Employers use revised withholding tables to increase the take-home pay. However, taxpayers with multiple jobs or higher income levels may want to adjust their withholding to avoid an unexpected tax liability when they file their taxes.
Taxpayers who purchased certain new vehicles between February 17, 2009 and December 31, 2009 may also be eligible to deduct the sales and excise taxes on qualified new car purchases. This is a special deduction that can be taken even if the taxpayer does not itemize.
Discover other benefits
The American Recovery and Reinvestment Act of 2009 is filled with tax provisions that can mean more money in your pocket. Learn more about this act and take advantage of as much of it as you can.
Recommended resource: About the Recovery and Reinvestment Act