The following list is an overview of the more widely applicable tax changes affecting individuals and families in the new “American Recovery and Reinvestment Act of 2009” (the 2009 economic stimulus act):

“Making Work Pay” credit

The new law provides an individual tax credit in the amount of 6.2 percent of earned income not to exceed $400 for single returns and $800 for joint returns in 2009 and 2010. The credit is phased out at adjusted gross income (AGI) in excess of $75,000 ($150,000 for married couples filing jointly). The credit can be claimed as a reduction in the amount of income tax that is withheld from a paycheck, or through a credit on a tax return. Under the credit, workers can expect to see perhaps $13 a week less withheld from their paychecks starting around June. Next year, the extra take-home pay will go down to around $9 per week.

Expanded first-time credit for first-time home buyers

Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10% of the purchase of a home (up to $75,000) by first-time home buyers. The provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit were required to repay any amount received under this provision back to the government over 15 years in equal installments (or earlier if the home was sold). The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The new law enhances the credit by eliminating the repayment obligation for taxpayers that purchase homes on or after January 1, 2009. It also extends the credit through the end of November 2009, and bumps up the maximum value of the credit from $7,500 to $8,000.

If you are a first time home buyer in the Chicagoland Area, there will be a FREE first time home buyer seminar on March 5, 2009 at the Schaumburg Community Recreation Center. The new tax credit for first time home buyers will be discussed among other topics in a roundtable format. Seats are limited so be sure to register here.

Economic recovery payment

The new law provides for a one-time payment of $250 to retirees, disabled individuals and Social Security beneficiaries and SSI recipients receiving benefits from the Social Security Administration and Railroad Retirement beneficiaries, and to veterans receiving disability compensation and pension benefits from the U.S. Department of Veterans’ Affairs. The one-time payment is a reduction to any allowable Making Work Pay credit. Read the rest of this entry »

Congress recently passed three laws that contain some tax provisions. Here’s a quick overview:

FARM ACT- The Food, Conservation and Energy Act of 2008 was vetoed by President Bush but became law when Congress overrode his veto. As the short title implies, the law mainly affects farmers and includes provisions on conservation donations, race horse depreciation, timber sales, CCC loan transactions, and farm loss deductions. Relief for certain disaster victims and increases in estimated tax payments for large corporations in 2012 are among other miscellaneous provisions.

HEROES ACT- The Heroes Earnings Assistance and Relief Tax Act of 2008 provides tax breaks for military personnel, civilian employers of those called to military service, veterans, and reservists serving in the military. The Act’s revenue-raising provisions include an increase in the minimum penalty for failing to file a tax return, a requirement that certain foreign subsidiaries of U.S. corporations must now pay employment taxes, and an immediate tax bill on Americans who give up their U.S. citizenship to escape income and estate taxes.

HOUSING ACT- The Housing and Economic Recovery Act of 2008 was passed to provide financial stability to the troubled housing market and tax relief to homeowners and home buyers. The law gives first-time home buyers a refundable tax credit of up to $7,500 that must be paid back over 15 years. The credit phases out for singles with incomes over $75,000 ($150,000 for couples) and is available for home purchases from  April 9, 2008, through June 30, 2009. Another provision gives homeowners an additional standard deduction for real property taxes in 2008.  The maximum deduction is $500 for singles and $1000 for joint filers. One of the revenue-raising provisions in the law will limit the exclusion of gain on the sale of a principal residence that had been used previously as a rental property or second home. Use this calculator to determine your tax savings.