Highlights From the American Recovery and Reinvestment Act That Effect Everyday American Households

On February 17, 2009, the American Recovery and Reinvestment Act (the Act) of 2009 was signed into law. The Act represents a stimulus package in excess of $750 billion, which seeks to address the current economic challenge faced by the United States. Listed below are highlights of several benefits that effect everyday American households.

First-Time Home Buyers [1]

The Act increases and extends the first-time home-buyer tax credit enacted last year. The prior $7,500 refundable tax credit was subject to a repayment clause which essentially recaptured the credit over 15 years. However, the Act increases the tax credit to $8,000 and is no longer subject to a repayment clause for homes purchased after December 31, 2008, but before December 1, 2009.

Increased Alternative Minimum Tax Exemptions [2]

The Act increases the Alternative Minimum Tax (AMT) exemption amounts to $46,700 (for individuals) and $70,950 (for married persons filing jointly). The increase appears nominal relative to the 2008 levels of $46,200 and $69,950. However, without this change, the exemption amounts would have reverted to the 1993 levels of $33,750 and $45,000.

Section 529 Expenses Include Computer Technology and Equipment Costs [3]

For expenses paid or incurred after December 31, 2008, the Act expands the definition of "qualified higher education expenses" for Section 529 Education Plans to include qualified expenses for computer technology, equipment, or Internet access and related services. The technology and equipment must be purchased in 2009 and 2010 and used by the beneficiary of the 529 Plan while enrolled at an eligible educational institution.

Increased Transportation Benefits [4]

Effective March 1, 2009, the Act increases the exclusion threshold for commuter transit benefits and transit passes from $120 per month to $230 per month. The limit is now commensurate with the parking expense limit. Similarly, if the parking expense limit increases in 2010, the threshold for commuter transit benefits and transit passes will also increase. This provision will be effective through December 31, 2010.

[1] American Recovery and Reinvestment Act of 2009, Title I Sect. 1006

[2] American Recovery and Reinvestment Act of 2009, Title I Sect. 1012

[3] American Recovery and Reinvestment Act of 2009, Title I Sect. 1005

[4] American Recovery and Reinvestment Act of 2009, Title I Sect. 1151