American Recovery and Reinvestment Act of 2009
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American Recovery and Reinvestment Act of 2009
federal law enacted to stimulate economic recovery from the recession and financial crisis of the previous year by spending $790 billion on infrastructure, providing tax incentives, and giving money to states and localities. The Act had three components:
Spending: billions of dollars were appropriated for projects including modernization of the electrical grid, computerization of medical records in hospitals and other medical facilities, energy-efficient upgrades to public facilities, road and bridge construction, public transit, high-speed rail, and water infrastructure.
Aid to states and localities: billions of dollars were sent to states and localities to supplement their budgets and pay for schools, Medicaid, foreclosure prevention, extension of jobless benefits, and increases in college grants.
Tax cuts: many changes were made in the tax code to allow Americans to keep more of their earnings. Some of the most important tax changes include:
• Extension of alternative minimum tax relief in 2009 by increasing the AMT exemption amount by $70,950 for joint filers and $46,700 for individuals.
• Excluded interest from tax-exempt private activity bonds from the Alternative Minimum Tax.
• Sales and excise tax deduction for new vehicle purchases of $49,500 or less including cars, light trucks, recreational vehicles, and motorcycles through 2009. The deduction is subject to phase out for individuals with adjusted gross income over $125,000 and couples filing jointly with AGIs of over $250,000.
• Institution of plug-in electric vehicle credit of $2,500.
• Computers as a qualifying expense under Section 529 Education Plans.
• American Opportunity Education tax credit up to $2,500 of the cost of college tuition and related expenses in 2009 and 2010. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $80,000 ($160,000 for couples filing jointly).
• Refundable first-time home buyer credit. Tax credit of up to $8,000 for those who have not owned a home for the past three years if they buy a home between January 1, 2009 and December 1, 2009. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $75,000 ($150,000 for couples filing jointly).
• Making Work Pay tax credit. Provision cuts taxes for 95% of working families by offering a refundable tax credit of up to $400 for working individuals and $800 for working families. Taxpayers can receive this benefit through a reduction in the amount of income tax withheld from their paychecks or through claiming the credit on their tax returns. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $75,000 ($150,000 for couples filing jointly).
• Increase in Earned Income Tax Credit. For working families with three or more children, the earned income credit would increase from 40% to 45% of the family’s first $12,570 of earned income.
• Increased eligibility for refundable portion of child credit. The child tax credit is refundable to the extent of 15% of the taxpayer’s earned income over $3,000, down from $8,500 previously.
• Tax credits for energy-efficiency improvements in homes. A tax credit of 10% of the amount paid for qualified energy efficiency improvements including natural gas, propane, oil furnace, or hot water boilers, up to $1,500 per property.
• Premium subsidies for COBRA continuation coverage for unemployed workers. 65% of a worker’s COBRA premiums would be subsidized for up to 9 months if they had been involuntarily terminated.
• Small business capital gains. Allow small businesses to exclude 75% of a capital gain from the sale of a business held for more than 5 years.
• Enhanced small business expensing. Small business taxpayers are allowed to write off up to $125,000 in capital expenditures once those expenditures exceed $500,000 through the end of 2010.
• Extension of net operating losses from 2 years to 5 years back for small businesses with gross sales of $15 million or less.
• Extension of bonus depreciation. Businesses can recover the costs of capital expenditures to 50% of those costs for depreciable property such as equipment, tractors, wind turbines, solar panels, and computers purchased in 2009.
Spending: billions of dollars were appropriated for projects including modernization of the electrical grid, computerization of medical records in hospitals and other medical facilities, energy-efficient upgrades to public facilities, road and bridge construction, public transit, high-speed rail, and water infrastructure.
Aid to states and localities: billions of dollars were sent to states and localities to supplement their budgets and pay for schools, Medicaid, foreclosure prevention, extension of jobless benefits, and increases in college grants.
Tax cuts: many changes were made in the tax code to allow Americans to keep more of their earnings. Some of the most important tax changes include:
• Extension of alternative minimum tax relief in 2009 by increasing the AMT exemption amount by $70,950 for joint filers and $46,700 for individuals.
• Excluded interest from tax-exempt private activity bonds from the Alternative Minimum Tax.
• Sales and excise tax deduction for new vehicle purchases of $49,500 or less including cars, light trucks, recreational vehicles, and motorcycles through 2009. The deduction is subject to phase out for individuals with adjusted gross income over $125,000 and couples filing jointly with AGIs of over $250,000.
• Institution of plug-in electric vehicle credit of $2,500.
• Computers as a qualifying expense under Section 529 Education Plans.
• American Opportunity Education tax credit up to $2,500 of the cost of college tuition and related expenses in 2009 and 2010. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $80,000 ($160,000 for couples filing jointly).
• Refundable first-time home buyer credit. Tax credit of up to $8,000 for those who have not owned a home for the past three years if they buy a home between January 1, 2009 and December 1, 2009. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $75,000 ($150,000 for couples filing jointly).
• Making Work Pay tax credit. Provision cuts taxes for 95% of working families by offering a refundable tax credit of up to $400 for working individuals and $800 for working families. Taxpayers can receive this benefit through a reduction in the amount of income tax withheld from their paychecks or through claiming the credit on their tax returns. The tax credit is phased out for individual taxpayers with adjustable gross incomes of $75,000 ($150,000 for couples filing jointly).
• Increase in Earned Income Tax Credit. For working families with three or more children, the earned income credit would increase from 40% to 45% of the family’s first $12,570 of earned income.
• Increased eligibility for refundable portion of child credit. The child tax credit is refundable to the extent of 15% of the taxpayer’s earned income over $3,000, down from $8,500 previously.
• Tax credits for energy-efficiency improvements in homes. A tax credit of 10% of the amount paid for qualified energy efficiency improvements including natural gas, propane, oil furnace, or hot water boilers, up to $1,500 per property.
• Premium subsidies for COBRA continuation coverage for unemployed workers. 65% of a worker’s COBRA premiums would be subsidized for up to 9 months if they had been involuntarily terminated.
• Small business capital gains. Allow small businesses to exclude 75% of a capital gain from the sale of a business held for more than 5 years.
• Enhanced small business expensing. Small business taxpayers are allowed to write off up to $125,000 in capital expenditures once those expenditures exceed $500,000 through the end of 2010.
• Extension of net operating losses from 2 years to 5 years back for small businesses with gross sales of $15 million or less.
• Extension of bonus depreciation. Businesses can recover the costs of capital expenditures to 50% of those costs for depreciable property such as equipment, tractors, wind turbines, solar panels, and computers purchased in 2009.
| American Institute of Certified Public Accountants (AICPA), American Depositary Share (ADS) | |
| American Stock Exchange (AMEX), American-Style Option |
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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