HORNE Tax Alert

The American Recovery and Reinvestment Act of 2009

Significant Tax Provisions That May Affect You or Your Family

  • "Making Work Pay" Tax Credit - A refundable tax credit in 2009 and 2010 of 6.2% of earned income, limited to $400 for single taxpayers and $800 for married couples, received through a reduction in income tax withholding on payroll or through a credit claimed on tax returns. The credit is phased-out beginning with incomes above $75,000 ($150,000 for a joint return). The earned income credit and child tax credit were also liberalized, subject to phaseouts.
  • "American Opportunity" Education Tax Credit - A credit for 100% of the first $2,000 of tuition and related college expenses paid during the year plus 25% of the next $2,000 phasing-out for taxpayers with adjusted gross income in excess of $80,000 if single and $160,000 if married and filing a joint return for 2009 and 2010.
  • Refundable First-Time Home Buyer Credit - For homes purchased after January 1, 2009 and before December 1, 2009, first-time home buyers will receive a refundable tax credit of 10% of the purchase price of their home, up to $8,000, with no repayment obligation as existed in prior law unless the house is sold within three years of purchase.  The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
  • Increased Standard Deduction for Sales and Excise Taxes on Vehicle Purchases - In 2009, state and local sales and excise taxes paid on vehicles are deductible, subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 if single and $250,000 if married and filing a joint return.
  • Suspension of Tax on Unemployment Benefits - The first $2,400 of federal unemployment benefits per recipient will be free from federal income tax in 2009.
  • Alternative Minimum Tax - The 2009 alternative minimum tax exemption is increased to $70,950 for joint filers and $46,700 for individuals providing more than 26 million families with tax relief.
  • Computers as Education Expenses under 529 Plans - Expenses paid or incurred in 2009 or 2010 for the purchase of any computer technology or equipment or Internet access or related services qualify as education expenses under qualified tuition programs (QTPs) if such technology, equipment or services are to be used by the QTP beneficiary or his family during any of the years the beneficiary is enrolled at an eligible educational institution.
  • Bonus Depreciation - Extended from 2008 through 2009, taxpayers can immediately deduct up to 50% of the cost of most types of new depreciable property other than buildings. The first-year depreciation dollar cap for new automobiles placed in service in 2009 was raised by $8,000 which results in a projected $10,960 for passenger autos and $11,160 for a light truck or van.
  • Small Business Expensing - In 2008, Congress increased the amount that small businesses could write-off immediately for capital expenditures otherwise depreciated over time to $250,000 subject to a phase-out once capital expenditures exceeded $800,000. This 2008 increase has been extended through 2009.

HORNE's tax team is ready to help you with significant tax provisions. For more information, please contact your HORNE advisor or local HORNE office.