President Obama has just signed the "American Recovery & Reinvestment Act." While much of the news focuses on the spending provisions, it also includes $287 billion in tax cuts:
-The act includes a new "Making Work Pay" credit for 2009-10 to offset the first $400 of Social Security tax you pay ($800 for joint filers). It phases out as your adjusted gross income (AGI) tops $75,000 ($150,000 joint).
-There's a new higher education tax credit of up to $2,500 for your first $4,000 in college expenses. The credit phases out as your AGI tops $80,000 ($160,000 joint). You can also use Section 529 plan funds for computer-related expenses, including software and online access (2009-10 only).
-Buying a car? You can deduct state and local sales and excise tax you pay on a new (but not used) car, light truck, RV, or motorcycle you buy between January 1 and November 30, 2009. The deduction is limited to purchase amounts up to $49,500 and phases out as your AGI tops $125,000 ($250,000 joint).
-Buying a home? The act increases the "first-time homebuyer" credit from $7,500 to $8,000, extends the purchase period through November 30, 2009, and eliminates the requirement to repay the credit for homes purchased in 2009. This credit phases out as your AGI tops $75,000 ($150,000 joint).
-Buying business equipment? The act extends the current $250,000 first-year expensing limit and 50% bonus depreciation provisions for purchases through 2009.
-Finally, the bill "patches" the Alternative Minimum Tax, to protect 24 million mostly middle-income filers from the AMT's bite.
Congress passed these new rules with less deliberation than usual, so there's bound to be confusion
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