You don't live "off the grid," so you know that last month President Obama signed the "American Recovery and Reinvestment Act." While much of the news focuses on the spending provisions, it also includes $287 billion in tax cuts.
I’m writing this week to make sure you don’t miss any of the highlights. Here are the most important provisions:
- A new refundable "Making Work Pay" credit for 2009-2010 to offset the first $400 of Social Security tax you pay ($800 for joint filers). It phases out as your "adjusted gross income" (AGI) tops $75,000 ($150,000 for joint filers).
- A new "American Opportunity" tax credit for college costs equal to 100% of your first $2,000 in expenses and 25% of your next $2,000 in expenses ($2,500 total). The credit phases out as your AGI tops $80,000 ($160,000 joint). You can also use Section 529 plan funds for computer-related expenses, including software and online access (2009-2010 only).
- A new above-the-line deduction for state and local sales and excise tax you pay on a new (but not used) car, light truck, RV or motorcycle bought between January 1 and November 30, 2009. The deduction is limited to purchases up to $49,500 and phases out as your AGI tops $125,000 ($250,000 joint).
- An enhanced "first-time homebuyer" credit (now $8,000) for purchases through November 30, 2009 -- with no requirement to repay the credit for homes purchased in 2009! (You have to use the home as your primary residence for at least 36 months to avoid repayment.) This credit phases out as your AGI tops $75,000 ($150,000 joint).
- The act extends the current $250,000 first-year expensing limit and 50% bonus depreciation provisions for purchases through 2009.
- Finally, the bill "patches" the Alternative Minimum Tax to protect 24 million mostly middle-income filers from the AMT's bite.
Congress passed the new rules with less deliberation than usual, so there's bound to be confusion. So call me with any questions!
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