Tax Tips & Calculators

You might benefit this year from the American Recovery and Reinvestment Act of 2009 (ARRA). The act also might have affected your 2008 and 2009 returns in some cases, like if you're a first-time homebuyer.

Below are all the tax changes from the ARRA :

• The credit is 6.2% of earned income up to $400-$800 if married filing jointly
• The credit starts to phase out when your modified adjusted gross income (AGI) reaches $75,000-$150,000– if married filing jointly.
• The credit isn´t available if you make $95,000 - $190,000 – if married filing jointly

Economic recovery payment (ERP) – This 1-time payment of $250 was paid in 2009 to people who received these benefits from November 2008 through January 2009:

• Social Security
• Tier 1 railroad retirement benefits
• Supplemental Security income (SSI)
• Department of Veterans Affairs pension or disability benefits

If you qualified to receive this payment in 2009, but instead received it in 2010, you must include the payment on Schedule L.

COBRA – Certain jobless individuals might qualify to receive a federal subsidy of 65% of monthly COBRA premiums for 15 months. You must have been involuntarily terminated between Sept. 1, 2008, and May 31, 2010. Employers should notify you if you're eligible.

The subsidy isn't taxable to the recipient. However, eligibility for the subsidy phases out if you have a modified AGI of $125,000-$145,000 – $250,000-$290,000 if married filing jointly. For the 2011 tax year you might have to recapture subsidy amounts you received if your income falls into the phase-out ranges.

Earned Income Credit (EIC) – Families with 3 or more children get an increased EIC. Also, there's an additional marriage penalty relief if you're married filing jointly. When you file your 2010 return, confirm your EIC amount on the EIC chart.

Additional child tax credit – Lower-income families with children will receive increased eligibility for the refundable portion of the credit.

Homebuyer credit – First-time homebuyers who purchased a home after April 8, 2008, and before May 1, 2010, can receive up to an $8,000 refundable credit. Phase-out of this credit starts at $75,000 – $150,000 if married filing jointly.

After Nov. 6, 2009, both of these applied:

• The credit phase-out started at $125,000 – $225,000 if married filing jointly.
• The homebuyer credit was expanded to provide up to a $6,500 credit for long-time homeowners who purchased a replacement home.

The first-time homebuyer credit has expired. It isn´t available for tax year 2011, except in limited circumstances for service members serving overseas.

Nonbusiness energy credit – If you invest in energy improvements to your home–like new windows and doors – you can claim a credit of up to $1,500. This lifetime maximum is reduced to $500 – $200 for windows. The credit applies to 2011 returns. However, you must reduce it by any amount of the credit you claimed in 2009 and 2010.

Residential energy efficient property credit – If you're a homeowner who invests in energy improvements, you'll receive an increased credit when filing your 2009-2016 returns. Energy improvements include solar heating and geothermal pumps.

American Opportunity Credit – You can apply this enhanced Hope Credit to qualified education expenses for the first 4 years of higher education. The maximum credit is $2,500, of which 40% is refundable. The credit phases out if you have an AGI of more than $80,000 - $160,000 –if married filing jointly.

Section 529 plan distributions – The expanded definition of qualified higher education expenses now includes the purchase of computers and related equipment.

Plug-in electric vehicles credits – A modification to the credit benefits you, if you bought a qualified plug-in electric motor vehicle after 2009. The credit is limited to $7,500. The amount begins to decrease after the manufacturer sells 250,000 plug-in vehicles.

If you purchase a plug-in vehicle, ask the dealer about the credit. You'll claim the credit when you file your return for the year you purchased the vehicle.

There is also a $2,500 credit for either of these vehicles purchased between Feb. 17, 2009, and before Jan. 1, 2012:

• 2- or 3-wheeled vehicle
• Low-speed vehicle that maintains a speed of no less than 20 miles per hour and no more than 25

The vehicles must also:

• Be used mainly on public streets
• Weigh less than 14,000 pounds
• Draw power from battery with at least 4 kilowatt hours
• Use an external source to recharge the battery
• Be IRS certified

To learn more about how the government is distributing stimulus-package money www.recovery.gov.