TAX LAW

2 AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (ARRA) The Recovery and Your Family

3 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

4 Making Work Pay Credit Sch M

5 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

6 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

7 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

8 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

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

10 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