Highlights of the American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 ("AR&RA 09") was the landmark piece of legislation that was also referred to casually as the "2009 stimulus package". With a $787 billion estimated impact and provisions for companies and individuals alike, the AR&RA 09 was meant to stimulate the US and world economy by providing tax breaks and provisions for purchases of certain items, with the hope that negative economic impact would be minimized and the economy jump-started at the end of 2009 and in to 2010. Whether they knew it or not, many taxpayers qualify for one of the items that is part of the AR&RA and should be sure to take the credit on their 2009 tax returns.

Individual Deduction and Credit Highlights:
The most notable individual provision in the AR&RA is arguably the continuously evolving refundable first-time home buyer credit. Initially, this tax credit was designed for young couples or first-time home buyers, but on November 6, 2009, it was extended to cover qualifying home closings through April 30, 2010. In addition to technical first-time home buyers, the credit is now valid for long-time homeowners buying a new principal residence, and the income tax limitations have been raised which benefits more people. Taxpayers have the option of claiming the credit on their 2009 or 2010 returns. The maximum credit is $8,000 and is not required to be paid back.

Vehicles purchased in 2009 may qualify for a local and state sales tax deduction. Residents of states that charge a state sales and/or excise tax may be eligible for the purchase of a new car, light truck, recreational vehicle or motorcycle. All taxpayers are eligible for the local tax credit.

Working individuals and families are eligible for credits of $400 and $800 respectively. Individuals with a gross income over $75,000 or $150,000 for married couples filing jointly will be phased out.

The Alternative Minimum Tax (AMT) exemption amount has been increased to $70,950 for joint filers and $46,700 for individuals.

Corporate Deduction and Credit Highlights:
Small Business Capital Gains changes that include Section 1202 of current law that dictates 50% of the gain from the sale of certain small business stock (held for more than five years) may be excluded. The gain that is eligible for this credit is limited to the greater of 10 times the taxpayer's basis in the stock, or $10 million.

Currently, if a taxable corporation converts to a S Corporation, the conversion is not a taxable event. The S Corporation must hold it's assets for ten years in order to avoid a tax on any built-in gains that existed at the time of the conversion. The AR&RA reduces the holding period from 10 to seven years.

To recover the cost of certain capital expenses, small businesses may choose to write-off the cost of these expenses instead of depreciating. Until the end of 2010, small businesses may write-off up to $125,000.

A provision enacted last year has been extended to temporarily allow businesses to accelerate the recognition of a portion of their historic AMT (alternative minimum tax) or R&D (research and development) credits in lieu of bonus depreciation.

http://www.recovery.gov/Pages/home.aspx
http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet=7