Other Tax Provisions - American Recovery and Reinvestment Act of 2009

I’ve talked about folks who buy a car or get (or have) a job seeing tax advantages from this act. What else can you do to take advantage of the new tax laws?

Get a job (and have kids):
Two earned income based credits for taxpayers with qualifying children – the additional child tax credit and the earned income credit, were both expanded. The wage base to qualify for the additional child tax credit was decreased from $8,500 to $3,000, and additional earned income credit is available to taxpayers with three or more qualifying children.

Lose a job :-(
The first $2,400 of unemployment benefits are now excluding from federal income tax. Also, individuals who are involuntarily separated between September 1, 2008 and January 1 2010 can maintain their insurance while paying only 35% of the COBRA coverage (the employer is required to pay the balance, but can take it as a credit against federal payroll taxes and withholding).

Buy a house:
The 2008 stimulus package included a “credit” of up to $7,500 for first time howebuyers (it’s actually a loan). The ARRA increases that to $8,000 and eliminates repayment (after living in the home for 36 months) for homes purchased from January 1, 2009-November 30, 2009 by qualifying taxpayers.

If you bought a house on or after April 9, 2008 and before January 1, 2009 you may still qualify for the 2008 credit.

Go to college (or send your kids):
The HOPE credit got a new name (the “American Opportunity Tax Credit”) and some nice enhancements. The maximum credit was increased from $1,800 to $2,500 for 2009 and 2010. Also students in all four years of college (instead of only those with freshman or sophomore standing) now qualify, and course materials are now qualifying expenses. It’s not all easy street, however, the Treasury Department has been charged with exploring the feasibility of requiring community service to qualify for the education credits.

Withdrawals from Qualified Tuition Plans are now excludable from income if used to pay for computers and computer technology (including internet access) as well as previously qualified educational expenses. The computers have to be used by the student (but not exclusively).

Take the A Train (or Van Pool):
The amount of transportation fringe benefits excludable from income was increased from $120 to $230 per month.

AMT Patch:
Check out our 2007 newsletter (click on AMT Relief) for a more complete explanation of how the alternative minimum tax works, and why it gets “patched” every year. This year, the exemption amount will increase to $46,700 for most taxpayers ($70,950 for married taxpayers filing jointly)