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2009TAX LAW

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AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

(ARRA)

The Recovery

and Your Family

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Making Work Pay Credit

• Maximum credit is $400 ($800 if married filing jointly)

• Credit is refundable • Credit limited to 6.2% of earned income• Can be an employee or self-employed• Phased out over modified AGI range of

$75,000-$95,000 ($150,000-$190,000 if married filing jointly)

• Available for tax years 2009 and 2010

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Making Work Pay Credit

Sch M

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Making Work Pay Credit (continued)

• Taxpayer must have a social security number; if married filing jointly, at least one spouse must have an SSN

• Not available to nonresident aliens, individuals who can be claimed as dependents on someone else’s tax return, or estates and trusts

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Making Work Pay Credit (continued)

• Figured on new Schedule M (Form 1040 or Form 1040A) or on a worksheet on the back of Form 1040EZ and reported on separate line of Form 1040, Form 1040A, or Form 1040EZ

• Reduced if taxpayer received the economic recovery payment or eligible for government retiree credit

• Reduced withholding reflects all or part of the credit, but taxpayer may be underwithheld

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Special Credit for Certain Government Retirees

• One-time refundable credit of $250 was available for certain government retirees who receive a pension from work and not covered by Social Security

• Credit must be claimed on 2009 return and is a reduction to any Making Work Pay tax credit

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Economic Recovery Payments

• Payment of $250 made to recipients of social security benefits, supplemental security income, railroad retirement benefits, and veterans disability compensation or pension benefits

• Eligible individuals received the payment automatically; did not have to apply for the payment

• Only one economic recovery payment per person; this payment reduces the amount of making work pay credit

• Payment is not included in taxable income

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Unemployment Compensation

The first $2,400 of unemployment compensation is excluded from income in 2009

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American Opportunity Credit

• For tax years beginning in 2009, taxpayers can claim a credit up to $2,500 per student; new credit modifies the existing Hope and Lifetime learning credits for tax years 2009 and 2010

• Credit now includes required course materials in the list of qualifying expenses; also allows credit to be claimed for four post-secondary education years instead of two