Other Recent Tax Law Changes
The Making Work Pay Credit
The Making Work Pay Credit provides employees, including the self employed, with up to a $400 tax credit ($800 for married people filing jointly). The credit is 6.2% of earned income and phases out at modified AGI of $75,000 to $95,000 for singles or $150,000 to $190,000 for married people filing jointly. In 2009, taxpayers will receive the credit through a reduction in employee withholding and self-employed required estimated tax payments.
Economic Recovery Payments
People receiving social security, SSI, railroad retirement and veteran’s disability compensation benefits also receive a one-time $250 payment, offset by any Making Work Pay Credit.
COBRA Premium Assistance
The federal government is subsidizing 65% of COBRA premiums for employees who are involuntarily terminated between September 1, 2008, and February 28, 2010. The premium subsidy is in effect for any premium for a period of coverage beginning on or after February 17, 2009, for 15 months.
The tax-free element of this subsidy is reduced for singles with modified AGI between $125,000 and $145,000, and joint filers with modified AGI between $250,000 and $290,000. For singles with modified AGI above $145,000 and joint filers with modified AGI above $290,000, the subsidy is treated as gross income. If you are laid off, your employer should notify you about this rule.
Unemployment Compensation
Usually, state unemployment benefits paid to laid-off employees are taxed in full. However, in 2009, the first $2,400 of unemployment compensation you received is excluded from your gross income and not subject to tax.
Alternative Minimum Tax (AMT) Patch
Among the provisions included in the Emergency Economic Stabilization Act of 2008 is the AMT patch, which protects most middle-income taxpayers by increasing the AMT exemption amounts.
The 2009 exempt amounts are:
- $46,700 for single filers and heads of household,
- $70,950 for married taxpayers filing jointly or qualifying widow(er)s
- and $35,475 for married taxpayers filing separately.
Health Coverage Tax Credit
As of May 1, 2009, the Health Coverage Tax Credit increased from 65% to 80% of the person’s premiums for the qualified health insurance of specific family members. This credit expires in 2011.
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Next: Common deductions
This article was provided by the American Institute of Certified Public Accountants (AICPA).
