On February 17, 2009 President Obama signed The American Recovery and Reinstatement Act of 2009 into law. The legislation commonly referred to as the economic stimulus bill is a close to $800 billion stimulus package that includes nearly $300 billion in tax relief. The major tax provisions are as follows.

Making Work Pay Credit - a tax credit calculated at a rate of 6.2% of earned income up to $400 for individuals and $800 for joint filers applied retroactively to the start of 2009 continuing through 2010. The credit will be claimed either through a reduction in wage withholding or in a lump sum when filing one's tax return. The credit is phased out at a rate of 2% above adjusted gross income (AGI) of $75,000 ($150,000 in the case of joint filers). Employer FICA taxes are not changed.           
                 
Economic Recovery Payment - a one-time payment of $250 to Social Security recipients, railroad retirees and disabled veterans (reduces any Making Work Pay credit that the individual is entitled to).                                                                                                                                 

AMT Patch - what has become an annual legislative exercise in recent years; the 2009 AMT exemption amounts have been raised slightly above their 2008 levels to insulate approximately 26 million middle-income taxpayers from the grasp of the AMT.        
                    
First-Time Homebuyer Credit - for purchases of a principal residence between January 1, 2009 and November 30, 2009, the credit has been increased from $7,500 to $8,000 and does not need to be repaid unless the house is sold within three years of the purchase. The credit phase-out remains for taxpayers with AGI in excess of $75,000 ($150,000 for joint filers).                                                                                                                                 

New Car Deduction - individuals purchasing new vehicles in 2009 on or after the date of enactment can deduct sales taxes and excise taxes "above-the-line" attributable to the first $49,500 of the purchase price of any one vehicle. This deduction will be phased out once AGI reaches $125,000 ($250,000 for joint filers). Sales taxes paid on a lease agreement are not included.
                                                                                     
Unemployment Compensation - in addition to increasing and extending unemployment compensation benefits for various workers, the first $2,400 of unemployment compensation is excluded from income for 2009.
                                        
Bonus Depreciation - extended through December 31, 2009 allowing for 50% first-year depreciation.
 
Sec. 179 Expensing - the increased 2008 limits have been extended to 2009. The maximum Sec. 179 expense will continue at $250,000 and the phase-out will not begin until fixed asset additions exceed $800,000.
 
Net Operating Loss (NOL) Carryback - this measure was scaled back significantly from earlier proposals. A 2008 NOL can be carried back up to five years (current law permits a two-year carryback) but only for qualified small businesses with average gross receipts of $15 million or less.
 
Transit Benefits Parity - the current $120 per month income exclusion for transit passes and van pooling is increased to $230 per month starting in March 2009, thus equalizing it with the $230 per month permitted for parking.
 
Qualified Tuition Programs - for 2009 and 2010 distributions from Sec. 529 plans will be tax-free when used to pay for computers and computer technology, including internet access.
 
Residential Energy Property Credit - the new law increases the credit from 10% to 30%, raises the maximum cap to a $1,500 aggregate amount for 2009 and 2010 installations, and eliminates the $500 lifetime cap. There are other energy incentives including credits for electricity produced from renewable sources such as wind and for plug-in electric vehicles.
 
COBRA Benefits - an individual who is involuntarily separated from employment between September 1, 2008 and January 1, 2010 can elect to pay 35 percent of his/her COBRA coverage with the former employer paying the remaining 65 percent. The former employer will receive a credit against income tax withholding and payroll taxes it is otherwise required to remit to the federal government.