Individual Income Tax Provisions in the House and Senate Stimulus Bills

February 4, 2009

(NOTE: this blog post has been updated to reflect changes to the Senate bill regarding the First-Time Homebuyer Credit)

The House passed the “American Recovery and Reinvestment Tax Act of 2009” last week, and the Senate is currently working out the details for its own version of the stimulus. As far as income taxes are concerned, the two bills contain several similar provisions, though they differ somewhat in the details of some of those provisions. Here is a comparison of the Senate bill as it currently stands and the House bill that was passed last week:

Provision

Senate Bill (Pending)

House Bill (Passed Jan 28)

Making Work Pay Credit: New credit; 6.2% of earned income, up to a maximum credit of $500 per earner.

Phase-out at rate of 4% of AGI over $75,000 ($150,000 for joint filers).

Phase-out at rate of 2% of AGI over $75,000 ($150,000 for joint filers).

Earned Income Credit: Credit equals a fixed percent of income until the maximum credit is reached. Credit begins to phase out when income is greater than the phase-out threshold (credit rate, thresholds, and phase-out rate are based on the number of children in the unit).

Increase credit rate from 40% to 45% for filers with 3 or more children. Income level at which credit begins to phase out for joint filers is increased to $5,000 above the threshold for singles.

Same as Senate version.

Additional Child Tax Credit (ACTC): This is the refundable portion of the Child Tax Credit (CTC), and is allowed for certain taxpayers who cannot claim the full CTC because their tax liability is not high enough.

Reduces the income level at which a taxpayer can begin claiming the ACTC from $12,550 in 2009 to $6000.

Reduces the income level at which a taxpayer can begin claiming the ACTC from $12,550 in 2009 to zero.

American Opportunity Credit: New credit; replaces the current Hope credit. A credit for higher education expenses. 100% of first $2000 of qualified expenses and 25% of next $2000.

30% of the credit would be refundable and therefore available to taxpayers with little or no income tax liability.

40% of the credit would be refundable and therefore available to taxpayers with little or no income tax liability.

First-time Homebuyer Credit: Credit is lesser of $7500 or 10% of purchase price. Available to taxpayers who purchased a home between April 9, 2008, and June 30, 2009. Currently, the credit is refundable and must be paid back over a 15 year period.

Increases the maximum credit to $15,000, and makes the credit available to anyone purchasing a home, not just first-time buyers. Credit is no longer refundable, but can be equally divided among the two taxable years beginning with the year of purchase. Extends the eligible period to January 1, 2010. Also, waives the repayment requirement, but only for homes purchased in 2009 and only if the home is held and occupied for 2 years.

Waives the repayment requirement, but only for homes purchased in 2009 (must hold home at least for 3 years)

Alternative Minimum Tax Relief: The AMT exemption amounts are not indexed for inflation. In order to keep millions of taxpayers from having to pay AMT, Congress has routinely passed short-term patches for the past several years.

Includes an AMT patch for 2009. The patch increases the exemption amounts to $46,700 for individuals and to $70,950 for joint filers. Also, AMT liability can be reduced by the nonrefundable personal credits.

No AMT patch included.

Unemployment Compensation

Allows taxpayers to exclude up to $2400 in unemployment compensation from gross income for 2009.

No provision.


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