1 AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (ARRA) The Recovery and Your Family

2 “Making Work Pay” Tax Credit 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

3 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 Optional adjustment procedures available for pension plans Obtain Publication 919, How Do I Adjust My Tax Withholding? Use the “Withholding Calculator” on IRS.gov

4 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

5 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

6 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 Only taxpayers with valid Social Security numbers are eligible for the Making Work Pay Credit (or at least one taxpayer, if MFJ) Pension recipients with no earned income are not eligible for the Making Work Pay Credit and may be under withheld Taxpayers who can be claimed as dependents on someone else’s tax return are not eligible for the credit and may be under withheld

7 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

8 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

9 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

10 Child Tax Credit $1,000 per qualifying child Refundable portion – eligibility increased More lower income families qualify: 2008 – threshold amount = $8, – threshold amount = $3, – threshold amount = $3,000

11 “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)

12 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)

13 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.

14 Energy Conservation Incentives Federal Tax Credits for Energy Efficiency includes: Modification in residential energy efficient property for solar water, wind, and geothermal heat pump property expenditures Tax credits are available at 30% of the cost, up to $1,500, in 2009 & 2010 (for existing homes only) for: Energy-Efficient windows and doors, insulation, roofs (metal and asphalt), HVAC, water heaters (non solar), biomass stoves

15 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

16 Qualified Higher Education Expense (Sec 529 Accounts) Qualified Tuition Programs (QTPs) Computer technology and equipment allowed as a qualified higher education expense Effective for expenses paid or incurred in 2009 and 2010.

17 More Information? Go to Check Web site frequently for the latest updates