Tax Credits for Working Families in the American Recovery and Reinvestment Act
The American Recovery and Reinvestment Act is one of the most comprehensive pieces of legislation aimed at stimulating the American economy.  This act represents a number of goals including modernize the nation’s infrastructure, expanding educational opportunities, improving affordable healthcare, and providing tax relief.  While much of the act focuses on providing stimulus on a national and state level there are a number of provisions that provide relief for individuals and families.  Below are summaries of the tax benefits for working families included with the American Recovery and Reinvestment Act.
Making Work Pay
A centerpiece of the tax relief within the recovery act is the new Making Work Pay tax credit.  For 2009 and 2010 this provision will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. The Center for Budget and Policy Priorities estimates that 4,705,000
Child Tax Credit Expansion
The Child Tax Credit provides a partially refundable federal income tax credit of up to $1,000 per child (under 17) to help offset the costs of raising a child. The recovery act temporarily lowers the income threshold needed to qualify for the Child Tax Credit to $3,000. Under prior law, the credit was typically available only to those with earnings of $8,500 or more in tax year 2008 and $12,550 in tax year 2009. It is estimated that 626,000
Earned Income Tax Credit
The recovery act creates a temporary increase in the Earned Income Tax Credit (EITC) for 2009 and 2010. Prior to this change, the credit percentage for the EITC for a taxpayer with two or more qualifying children was 40 percent of the first $12,570 of earned income. The new law increases the percentage to 45 percent of the first $12,570 of earned income for taxpayers with three or more qualifying children. The EITC phase-out range has also been adjusted upward by $1,880 for joint filers.ÂÂ
Homeownership Tax Credit
The recovery act provides incentives to first time homebuyers by raising the Homeownership Tax Credit maximum from $7,500 to $8,000. In addition the act removes the repayment requirement making the credit refundable. The Homeownership Tax Credit applies only for homes purchased between January 1, 2009 and November 30, 2009 and is phased out for households with higher income.
The American
The recovery act provides assistance for financing higher education by making changes to the Hope Education Credit, a tax credit for qualifying tuition and related expenses for post-secondary education. The American Opportunity Tax Credit increases the maximum Hope Education Credit from $1,800 to $2,500. Up to 40 percent of the credit is refundable, with a maximum refund of $1,000. By making the credit refundable it will benefit families whose income was previously too small to utilize the benefit.  It is estimated that 156,000 students in
Economic Recovery Payments for Individuals with Social Security, SSI, and Veterans Benefits
In addition to providing tax relief for workers, the recovery act provides a one-time Economic Recovery Payment in 2009 of $250 for each person who received any Social Security, SSI, veterans disability compensation or pension benefits, or railroad retirement benefits in November or December 2008 or January 2009. It is estimated that 2,160,000 individuals in
Poverty Reduction
In an analysis of census data The Center for Budget and Policy Priorities (CBPP) finds that the combination of the Child Tax Credit expansion, the Make Work Pay Tax Credit, and the expansion of the Earned Income Tax Credit will result in keeping 1 million children, and more than 2.3 million Americans of all ages, out of poverty. For more information on the CBPP analysis of the American Recovery and Reinvestment Act go to www.cbpp.org