Provisions for Individuals

· American Opportunity Tax Credit—Revised Hope Education Credit

· Child Tax Credit is expanded

· Earned Income Credit expanded for families with 3 or more children

· First time Homebuyer Credit

· Making Work Pay Credit, Economic Recovery Payments & Government Retirees—Special Credit

· Residential Energy Property Credit

· Plug-in Electric Vehicle Conversion Credit

· COBRA Premium Assistance

· Qualified Tuition Programs—Eligible Expenses

· Sales Tax Deduction on new Vehicles

First-time homebuyer credit

The new law gives first-time homebuyers a tax credit equal to 10 percent of the purchase price of the home up to $8,000 ($4,000 for married individuals filing separately). The credit is only available to buyers of their principal residence made after December 31, 2008 and before November 30, 2009. The first-time homebuyer credit for 2009 does not have to be repaid provided the homeowner resides in the home for 36 months.

The credit phases-out for married couples with modified adjusted gross income (AGI) between $150,000 and $170,000, and for single taxpayers with modified AGI between $75,000 and $95,000.  Also, to be eligible to claim the credit, an individual (or his or her spouse, significant other or otherwise a co-owner) must not have had any type of ownership interest in a principal residence during the three-year period before the date that the principal residence, for which the credit is to be taken, is purchased.

Making Work Pay Credit, Economic Recovery Payments & Government Retirees—Special Credit

The Making work pay credit is a credit against income tax that is the lesser of 6/2% of the return’s earned income or $400 ($800 MFJ).  It is available for 2009 and 2010.  A one time Economic Recovery payment for 2009 only will be made to people on fixed incomes like Social Security, Railroad Retirement and Disabled Veterans.  Individuals receiving a government pension or annuity form work who are not covered by social security and weren't eligible to receive an economic recovery payment are allowed a $250 refundable tax credit.  The credit is $500 for joint return where both spouses are eligible individuals.  If an individual is eligible for the Making work Pay credit, that credit is reduced by the credit for government retirees.  If the taxpayer receives a Economic Recovery payment the Government Credit and the Making work pay credit will be reduced by this payment.

Residential Energy Credits

A nonrefundable residential energy credit equal to 30% of the cost of personal energy property (such as insulation, windows, electric heat pumps, etc, to a principal residence) is available.  The credit is limited to a total of $1,500 for 2009 and 2010.  Expenditures for a subsidized emery financing can be considered for the credit.

Plug in Electric Vehicle Credits

The alternative motor vehicle credit is expanded to include a credit for converting a motor vehicle to a qualified plug-in electric drive motor vehicle.  The credit equals 10% of the cost of converting the vehicle, up to a $4000 maximum credit.  A credit is also available for the purchase cost of a specified vehicle up to $2,500 per vehicle that is propelled to a significant extent by an electric motor.

Qualified Tuition Programs

Qualified higher education expenses is expanded for 2009 to include the purchase of any computer, technology or equipment and internet access and related services for use by the designated beneficiary and the beneficiary’s family.   Software designed for sports, games, or hobbies does not qualify.

Sales Tax Deduction on New Vehicles

Individuals who claim the standard deduction or who itemize and deduct state and local income taxes, can  also deduct state and local sales or excise tax paid on the purchase of a new passenger automobile, light truck, motorcycle or motor home.  The deduction is an important tax break for many businesses, the housing bill allows companies in a loss position to use accumulated on is limited to the amount of taxes attributable tot the first $49,500  of the purchase price and is phased out for taxpayers with AGI between $125,000 and $135,000 ($250,000 and $260,000 MFJ)

The tax provisions in the American Recovery and Reinvestment Act of 2009 include over 300 changes to the internal revenue code.  If you have any questions about how this sweeping new law may affect your tax situation, please feel free to call our office.