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Tax Recovery Act

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Summary of the American Recovery and Reinvestment Act of 2009

Provided by:
Robert M. Ingram

The American Recovery and Reinvestment Act of 2009 was signed into law by President Obama on February 17, 2009.

Also known as the economic stimulus package, the American Recovery and Reinvestment Act of 2009 has four broad categories: tax breaks, investments in health care and alternative energy, funding for “ready-to-go” infrastructure projects and funds to aid state and local governments, including expanded benefits for the unemployed. The legislation comes with a $787 billion price tag, of which approximately $300 billion, or over 35%, is directed to tax relief.

This paper reviews the tax relief and tax incentives made available by the legislation to both individuals and businesses, as well as summarize the new assistance available to the unemployed.

As you review the attached summary, pay particular attention to any provisions you feel may impact on your situation. If you would like additional information on the American Recovery and Reinvestment Act of 2009 or to discuss the impact of specific provisions on your planning, please call my office.

Individual Tax Relief “Making Work Pay” Tax Credit:

The Making Work Pay tax credit effectively offsets a worker’s share of the FICA Social Security payroll tax by providing a credit against income tax equal to the lesser of 6.2% of an individual’s earned income or $400 ($800 for married couples who file jointly). The credit applies retroactively to January 1, 2009 and will be available again in 2010. The full credit is available to single filers whose modified adjusted gross income does not exceed $75,000 ($150,000 for married couples who file jointly). The credit begins to phase out for single filers with modified adjusted gross incomes of $75,000 and disappears entirely when modified adjusted gross income reaches $95,000. For married couples filing jointly, the phaseout begins at $150,000 and the credit disappears entirely at $190,000.

Download the complete report 2009 Tax Recovery Act (980).