Clerestory Advisors, Inc.
Finance & Tax Tips Archive

Finance & Tax Tips Archive

American Recovery and Reinvestment Act of 2009

  • On February 17, 2009, the President signed the American Recovery and Reinvestment Act of 2009. This comprehensive economic stimulus package includes a number of important new tax provisions, including a deduction for sales tax on new motor vehicle purchases. For qualified motor vehicle purchases between February 17, 2009 and December 31, 2009, a person can deduct sales tax as itemized deduction on Schedule A. Maximum vehicle value is $49,500. Phases out Single AGI $125,000 - $135,000; Joint AGI $250,000 - $260,000. Taxpayers not itemizing will also benefit from this deduction by increasing the amount of their standard deduction by their vehicle sales tax. For a more complete listing of provisions affecting individuals as well as businesses, please refer to the Summary of the American Recovery and Reinvestment Act of 2009 by the National Association of Tax Professionals included in our Resources section.

  • The Act also included a First-time Homebuyer Credit. The existing first-time homebuyer credit is extended for qualifying home purchases prior to December 1, 2009 (originally set to expire June 30, 2009). The maximum credit increased to $8,000 (formerly $7,500). The 15 year automatic recapture of the credit is now waived but only for homes purchased between January 1, 2009 – November 30, 2009. CAUTION: For homes purchased between April 9, 2009 and December 31, 2008, the 15 year recapture provision still applies (in essence, 2008 homebuyers taking the credit must “payback” the $7,500 credit over 15 years as a noninterest bearing loan). Credit will continue to be subject to recapture if taxpayer sells the home or the home is no longer their principal residence within 36 months from purchase date. Recapture is limited to gain on sale. Credit phase out – Single AGI - $95,000; Joint AGI $150,000 - $170,000.

  • The Act also granted COBRA continuation coverage. Workers involuntarily terminated during September 10, 2008 to December 31, 2009 pay only 35% of the COBRA insurance premium cost. Employers can obtain credit for the remaining 65% of the premium cost when filing their quarterly employment tax report.

  • The Act also included a Making Work Pay Credit. For 2009 and 2010 tax years, a refundable earned income tax credit of up to $400 for Individual and $800 Joint returns (calculated using 6.2% of taxpayer earned income) is available. Also, qualified individuals should receive slightly higher paychecks starting about April/May 2009 as employers begin to use new, slightly lower federal tax withholding tables. There is a phase out for this credit. If you file as an individual and your Adjusted Gross Income is $75,000 to $95,000, or if you file a joint return and your Adjusted Gross Income is $150,000 to $190,000, you will receive no credit.

  • The Act also included an Economic Recovery Payment. A one-time payment of $250 will be given to taxpayers eligible for Social Security benefits, Railroad Retirement benefits, Veteran's compensation or SSI benefits. This payment is not taxable income. Checks were expected to be mailed by mid-June 2009.

  • The Act also included an enhancement of Hope Credit. For 2009 and 2010, the credit is increased to include the first four years of college and maximum of $2,500 each year (formerly first two years only and $1,800 credit maximum). The credit is calculated as 100 percent of first $2,000 tuition and related expenses and 25 percent thereafter annually. The credit phases out for Single AGI $80,000 - $90,000 (formerly $50,000-$60,000) and Joint AGI $160,000 - $180,000 (formerly $100,000-$120,000).

  • The Principal Residence Energy Credits were also part of the Act. The credits were extended for energy efficient home improvements made through 2010. The credit increased from 10 percent to 30 percent of amount incurred during 2009 and 2010. The property by property dollar caps (for example, $50 for circulating fans and $150 for furnaces, etc.) were eliminated. Aggregate credit increased from $500 to $1,500 during the 2009 and 2010 period. Note: If you fully used the previous energy credit limit of $500 prior to 2009, you now have a new $1,500 total credit for 2009-2010.

  • Additions to the qualified expenses for the Section 529 Plan were also part of the Act. For 2009 and 2010, expenditures for computer technology and equipment now qualify as an education expense for Section 529 Plans.

  • The Act also increased the Alternative Minimum Tax (AMT) exemption to $70,950 for 2009.

February 2009

  • If you claimed exemption from income tax withholding last year on the form W-4 you gave your employer, you must file a new form W-4 by February 15, 2009 to continue your exemption for another year.

January 2009

  • January 15, 2009 is the date to make a payment of your estimated tax for 2008 if you didn't pay your income tax for the year through withholding. Use form 1040-ES.

December 2008

  • December 31, 2008 is the deduction deadline: the last date to make payments that can be deducted from your 2008 tax return.