American Recovery and Reinvestment Act of 2009 Publication 553 – Highlights of Changes Additional changes due to Nov 6, 2009 legislation per Pub 4491-X Module NJ 2.10

Making Work Pay Credit Refundable Credit Line 63 Form 1040 – Schedule M Up to $400, $800 MFJ Based on 6.2% of earned income Phased out AGI $75,000 ($150,000 joint) Based on Earned Income Reduced by $250 if SSA, VA, RRB Government Retirees not covered SS not elig for SSA, VA, RRB - receive $250

New Vehicle Taxes Deduction State and Local Sales Tax and Excise Taxes On first $49,500 of purchase price Purchases after Feb 16, 2009 and before 2010 Available to non-itemizers Schedule L to calculate deduction

Increased Credits Residential Energy Credits – expired in 2007 has been reinstated Temporary increase in EITC Up to three or more qualified children – up to $5,657 Maximum income $43,279 ($48,279 joint) for three or more qualified children Reduction of earned income needed to claim ACTC

Education American Opportunity Tax Credit – (Hope Credit Expanded) Increase to $2500 per student First four years post-secondary education 40% of the credit is refundable Required course materials allowed Expenses for computers, software and internet access allowed

Other Changes Definition of Qualifying Child Revised New rules for children of divorced or separated parents After July 2, 2008 Effective calendar year following year release is provided Form 8332 release attached to return Unemployment Compensation Exclude up to $2400 from Gross Income

Final First-Time Homebuyer Credit Refundable credit up to $8,000 Closing must be between 04/09/2009 and 06/30/2010 (inclusive) Note: Must have binding contract by 04/30/2010 “First Time” means did not own principal residence in 36 months prior to purchase Credit must be repaid if home ceases to be TP’s principal residence with 36 months of purchase Credit for purchase made in 2009 can be claimed on 2009 or 2008 tax return Credit reduced or eliminated for high income TPs Form 5405 to claim credit

Final Credit for Long Time Homeowner Buying a Replacement Home Refundable credit up to $6,500 Closing must be between 04/09/2009 and 06/30/2010 (inclusive) Note: Must have binding contract by 04/30/2010 “Long Time” means owned principal residence for any 5-year consecutive period during 8 years ending on date of replacement home purchase Credit must be repaid if home ceases to be TP’s principal residence with 36 months of purchase Credit for purchase made in 2009 can be claimed on 2009 or 2008 tax return Credit reduced or eliminated for high income TPs Form 5405 to claim credit

Significant Revisions to Pub 4012 See Publication 4491-X on njtaxaide.org/tavolunteers Qualifying child as dependent Must be younger than TP or spouse if MFJ Reporting tax exempt interest Increase standard deduction by real estate tax and/or sales tax on new car purchase – Schedule L Note: Volunteers are strongly encouraged to mark up Pub 4012 with changes in 4491-X 11/23/2016 9

ADDITIONAL INFO ABOUT HOMEBUYERS CREDIT For home less than $800K Purchaser must be at least 18 and cannot be dependent Credit for home purchases in 2010 can be claimed in either 2010 or 2009 Purchases after 11/6/09 - increased income limitations Claims on 2009 Federal Returns Cannot be e-filed - must be filed manually Must use revised form /23/