AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (ARRA)

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 = $8,500 • 2009 – threshold amount = $3,000 • 2010 – 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 www.IRS.gov • Check Web site frequently for the latest updates