A variety of popular tax exclusions, deductions and credits for individuals were provided, extended or enhanced by the American Recovery and Reinvestment Tax Act of 2009 (2009 Recovery Act), as follows:

Exclusions from Income:

• Qualified bike commuting reimbursements of up to $20 per month
• Discharged principal residence indebtedness of up to $2,000,000 ($1,000,000 for married separate filers)
• $250 economic recovery payments
• Increased $460 per month limitation for transportation fringe benefits offered by an employer
• Exclusion of the first $2,400 (per person) of unemployment compensation benefits received
• The percentage of exclusion is increased to 75% for sales of small business stock acquired after February 17, 2009 and before January 1, 2011 (stock must be owned and held for more than five years).

Deductions:

• Safe harbor method to calculate theft loss deduction for fraudulent investment (Ponzi) schemes
• Qualified mortgage insurance premiums obtained in connection with acquisition indebtedness
• Computer equipment and technology, and internet access and related service costs are qualified higher education expenses for qualified tuition programs for 2009 and 2010

Tax Credits:

• The American Opportunity Tax Credit replaces the Hope Scholarship Credit for 2009 and 2010, and now applies to the first four rather than the first two years of a student’s post-secondary education. The maximum credit is increased to $2,500 per eligible student.
• The refundable earned income credit is increased to a maximum of $5,657 for qualifying families with three or more children.
• Beginning with purchases after December 31, 2008, the maximum first-time homebuyer credit (FTHBC) amount is increased to $8,000 ($4,000 for married separate filers). The FTHBC is extended by the Worker, Homeownership, and Business Assistance Act of 2009 (2009 Worker Act) to include qualifying purchases after April 9, 2008, and before May 1, 2010. In addition, for 2009 and 2010, the 2009 Worker Act waives the recapture of the credit if the home is used as a principal residence for at least three years.
• Certain government retirees can claim a refundable $250 tax credit ($500 on a joint return if both spouses are eligible).
• A refundable Making Work Pay Credit (MWPC) is advanced to eligible workers, generally through reduced income tax withholding. The MWPC is equal to the lesser of 6.2 percent of earned income, or $400 ($800 for married joint filers).
• The refundable portion of the child tax credit (CTC) is increased to 15% of earned income in excess of $3,000 (the previous threshold amount was $12,550, making the maximum increase in the refundable CTC $1,432.50).
• The credit for nonbusiness energy property (CNEP) is extended through 2010, and the credit amount increases from 10 to 30 percent of qualified energy efficiency improvements (including doors, windows, furnaces, central air conditioners, water heaters, heat pumps, biomass stoves, and certain asphalt roofs). The credit is limited to a total of $1,500 over the 2009 and 2010 tax years.
• The residential energy efficient property (REEP) annual credit maximums of $2,000 for solar hot water heaters, $500 for each half kilowatt of electric capacity generated by a wind turbine (not to exceed $4,000 annually), and $2,000 for geothermal heat pumps are eliminated for tax years 2009 through 2016. The maximum annual credit for each half kilowatt of electric capacity from fuel cell plants remains at $500.
• For tax years beginning in 2009, the alternative motor vehicle (AMV) credit is treated as a nonrefundable personal tax credit.
• A credit is available for qualified plug-in electric drive motor vehicles (PEDMVs) placed in service in 2009 through 2014. The maximum PEDMV credit is between $7,500 and $15,000 depending upon the weight of the vehicle.
• A new credit is available for converting an existing motor vehicle into a qualified PEDMV. The maximum credit of $4,000 applies to conversions made after February 17, 2009 and before December 31, 2011.
• The new plug-in electric vehicle credit (PEVC) is modeled on the PEDMV credit, and provides a credit equal to 10% of the cost of acquiring certain electrically powered 2-wheeled, 3-wheeled, and low-speed vehicles. The PEVC is capped at $2,500, and generally applies to vehicles purchased after February 17, 2009 and before January 1, 2012.

At The Haggerty Group, we will review your tax situation and evaluate strategies that may help minimize your tax bill.