Last week, President Obama signed into law the American Recovery and Reinvestment Act of 2009. The following is a list of some of the major provisions of the new law without significant details which will follow as rules are issued. Note that many of the benefits are temporary and/or are phased out for higher income individuals.
Higher Loan Limits. Conforming and FHA mortgage limits in high-cost areas were temporarily raised back to the limits which expired at the end of 2008. This will mean an increase of $625,000 to just under $730,000 in higher cost of living areas such as Northern California and New York City. The bottom line will be lower rates in these areas because "jumbo" loans carry a higher rate.
"Making Work Pay" Tax Credit. For 2009 and 2010, the Act creates a refundable tax credit of up to $400 for working individuals or $800 for couples with modified adjusted gross income (MAGI) that does not exceed $75,000 or $150,000 respectively. An additional credit was passed for those who do not work, such as the retired and the disabled.
AMT Exemption Raised. The Act raises AMT exemption amounts above 2008 levels to $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for single filers and heads of households (up from $46,200).
First-Time Homebuyer Tax Credit. The Act expands the low-to-moderate income first-time homebuyer tax credit, originally enacted under the Housing Assistance Tax Act of 2008. The maximum amount of the credit is increased to $8,000 and the Act eliminates the repayment obligation for qualified principal residences purchased from January 1, 2009 through November 30, 2009. To be exempt from repayment, the homebuyer must stay in the home for three years.
New Car Deduction. Effective for new vehicle purchases on or after February 17, 2009, the Act allows qualified taxpayers an above-the-line deduction for all state, local sales and excise taxes paid relating to the first $49,500 of the purchase price of a new car, light truck or other vehicle through the end of the year.
Education Tax Credit. For 2009 and 2010, the Act expands and renames the existing HOPE education credit, increasing the credit amount (subject to income limits) from $1,800 to $2,500 a year and applying the credit to all four years of college. The Act also makes 40% of the credit refundable and adds course materials as qualifying expenses.
Bonus Depreciation. The Act extends the first-year 50% bonus depreciation enacted under the 2008 Economic Stimulus Act for new business equipment purchases through December 31, 2009. The Act also extends through 2010 bonus depreciation for other qualified property.
Net Operating Loss Carryback. The Act enables qualified small businesses with average gross receipts of $15 million or less to carry net operating losses back for up to five years. The carryback provision applies to any NOL for tax years beginning or ending in 2008