What does the American Recovery and Reinvestment Act of 2009 mean for you?

Well, the first thing you have to know is that if you make over $75K as a single or $150K as a family, many of the tax breaks phase out.  With that said, here are the things the Stimulus Bill has for individual tax payers:

• You get up to an $8,000 tax credit if you’re a first time home buyer and you purchase the house between January 1 and December 1 2009.  Now the tricky part here is what qualifies as a first time home buyer and how much of a credit you actually get.

-For the credit you get 10% of the value of the home up to $8,000.  That means to get the full credit you have to purchase a house with a value of at least $80,000.

-For the first time home buyer rule, obviously if you have never purchased a home you qualify.  But if you have had a home before you can still qualify by the IRS definition below:

A first time home buyer is anyone who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

• The next thing you get is relief from certain Alternative Minimum Tax.  AMT is a horrible tax code that was meant for the extremely wealthy to make sure they did not take advantage of to many tax deductions.  The problem, however, is the AMT has not been updated and now applies to millions of tax payers.  Each year this grows and really penalizes those that qualify for it.  The rules are complicated and it is best to ask your tax professional, but if you paid AMT in the past, you may have some relief temporarily for 2009 and 2010.

• A one-time payment of $250 to Social Security beneficiaries, railroad retirees and veterans receiving benefits from the Department of Veterans Affairs. State government retirees not eligible for Social Security would also get the $250 payment.

• A $2,500 tax credit for college education expenses.

• For the refundable child tax credit for low income workers, the bill reduces the floor to $3,000 from $8,500.

• A refundable tax credit of $400 per individual or $800 per couple called the “making work pay” credit.  The amount will not be in the form of a check, but rather your withholdings on your paycheck will be adjusted to reflect the tax credit.  If you get paid twice a month, this will give you approximately $16 more per pay check.  More on this credit can be found on the IRS website here: http://www.irs.gov/newsroom/article/0,,id=204447,00.html
• Updated withholding tables from IRS.

• Money back for new vehicle purchases. The American Recovery and Reinvestment Act of 2009 provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles through 2009. The deduction is available regardless of whether ataxpayer itemizesdeductions on Schedule A. Purchases before Feb. 17, 2009,are not eligible for this special deduction.

The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified AGI between $125,000 and $135,000.

• Cobra extension and subsidy. Workers who have lost their jobs may qualify for a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to nine months.

Eligible workers will have to pay 35 percent of the premium to their former employers.

To qualify, a worker must have been involuntarily separated between Sept. 1, 2008, and Dec. 31, 2009. Workers who lost their jobs between Sept. 1, 2008, and enactment, but failed to initially elect COBRA because it was unaffordable, get an additional 60 days to elect COBRA and receive the subsidy.

This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

See more at the department of labor.