Reinvestment and Recovery Act of 2009

 This credit, which is called the Making Work Pay Credit, allows eligible individuals to receive a credit of 6.2% up to $400 of their earned income for tax years 2009 and 2010. Most qualified taxpayers will receive the credit throughout the year by reducing their withholdings, thereby increasing their take-home pay. Read more about Making Work Pay Credit.

 Eligible individuals on a fixed income are eligible for a one-time $250 “stimulus” payment, which will reduce any Making Work Pay credit. Read more about the Economic Recovery Payment to Certain Recipients.

There are two credits associated with children in the new act. First, for 2009 and 2010, taxpayers who qualify for the Earned Income Tax Credit (EITC) and have three or more qualifying children will receive a higher EITC. Read more about EITC.

Second, is the Additional Child Tax Credit. Also for 2009 and 2010, taxpayers with a qualifying child(ren) and income between $3,000 and $8,500 will be eligible to receive the additional child tax credit, and many lower income taxpayers will receive more additional child tax credit than in previous years. Read more about the Additional Child Tax Credit.

 If you are the beneficiary of a qualified tuition program then for 2009 and 2010 you can use tax-free distributions from the program to pay for qualified education-related expenses such as a laptop and internet access.

 Taxpayers who purchase a qualifying new home after December 31, 2008 and before December 1, 2009, may claim a refundable credit of 10% of the purchase price up to $8,000 ($4,000 if married filing separately). In addition, the credit does not have to be repaid unless the taxpayer sells the home within 36 months.

 For tax year 2009 only, the first $2,400 of unemployment compensation is excluded from tax. All unemployment compensation beyond the first $2,400 is taxable.

 Taxpayers may deduct the sales tax or excise tax paid on up to the first $49,500 of the purchase price of a vehicle as either an itemized deduction or an addition to their standard deduction.

 The AMT patch has been extended and the exemption amounts are now $46,700 ($70,950 if married filing jointly).

 The Nonbusiness Energy Property Credit was increased to 30% without individual item caps and the total allowable credit for 2009 and 2010 is $1,500. The Residential Energy Efficient Property Credit has also been increased to 30% of the cost of installation and the individual item caps have been removed.

 There are a number of changes to vehicles that will fall into the “plug-in” category. These are not simply hybrids. As these vehicles are not yet available, this incentive has already had an impact on the auto market as eight companies have set delivery dates for the plug-in hybrids. Generally, the credit is for up to $7,500 for the first 200,000 vehicles per manufacturer.

 First, the special 50% depreciation allowance for new assets purchased and placed in service during the year has been extended through tax years beginning in 2009. In addition, the increased section 179 deduction for assets placed in service has been extended through tax years beginning in 2009. The deduction is reduced by the excess amount of assets above $800,000. Taxpayers with a qualifying small business (tax year beginning or ending in 2008) are eligible to elect to carryback their net operating loss any number of years between three and five.

 For tax year 2009, individuals receiving taxable retirement checks from any federal, state, or local government entity will be eligible for a refundable credit of $250. This is not a stimulus payment. This credit generally applies to individuals who do not receive Social Security.