Monday, October 5, 2009

Tax Related Provisions of The American Recovery and Reinvestment Act of 2009 Part 2

The following provisions pertain to individuals.

Enhanced Credits for Tax Years 2009, The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. ARRA also increases the beginning point of the phaseout range for the credit for all married couples filing a joint return, regardless of the number of children. These changes apply to 2009 and 2010 tax returns. The earned income tax credit is a refundable credit intended to help people who work but earn modest incomes.

In addition, under ARRA, more families will be eligible for the additional child tax credit because of a change to the way the credit is figured. Taxpayers who cannot take full advantage of the child tax credit because the credit is more than the taxes they owe may receive a payment for some or all of the credit not used to offset their taxes. It is a refundable credit, which means taxpayers may receive refunds even when they do not owe any tax.

ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. Reducing the amount to $3,000 permits more taxpayers to use the additional child tax credit and increases the amount of the payments they may receive

Increased Transportation Subsidy. The ARRA also increases employer-provided benefits for transit and parking in 2009. The monthly tax exclusion for employer-provided commuter highway vehicle transportation and transit pass benefits increased to $230, effective from March through December 2009. Employees may exclude from income $230 per month in transit benefits and $230 per month in parking benefits –– up to a maximum of $460 per month. Employees may receive benefits for commuter transportation and transit passes and benefits for parking during the same month; they are not mutually exclusive.
These qualified transportation fringe benefits are excluded from an employee's gross income for income tax purposes and from an employee's wages for payroll tax purposes.

Up to $2,400 in Unemployment Benefits Tax Free in 2009. Under the American Recovery and Reinvestment Act (ARRA), the first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009: Normally, unemployment benefits are taxable.

$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board. A one-time payment of $250 will be made in 2009 to:

  • Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration.
  • Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs.
  • Railroad Retirement beneficiaries.
The IRS will not make this payment, unlike last year's economic stimulus program. Individuals who may qualify for this year's economic recovery payment should contact their respective agency for more information.

Energy Efficiency and Renewable Energy Incentives. The ARRA provides several tax incentives for individuals to invest in energy efficient products. Here is a list of some of those incentives:

  • Residential Energy Property Credit.
  • Residential Energy Efficient Property Credit.
  • Plug-in Electric Drive Vehicle Credit.
  • Plug-In Electric Vehicle Credit.
  • Conversion Kits
  • Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT.

Health Coverage Tax Credit. The credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

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