FACT SHEET | February 11, 2009

The American Recovery and Reinvestment Act of 2009 Cuts Taxes for Working Families

Declining incomes, fewer job opportunities, and rising costs have put a huge strain on many American families. That's why the American Recovery and Reinvestment Act of 2009 provides tax cuts to help middle-class families get ahead so they can reap the benefits of their hard work. Not only will these provisions provide relief to American families, they will help jumpstart our economy as these funds are spent quickly, leading to job creation and spurring economic growth.


Tax relief for 95 percent of workers.The American Recovery and ReinvestmentActincludes the Making Work Pay Tax Cut, which provides immediate and sustained tax relief to 95 percent of American workers through a refundable tax credit of up to $400 for workers and $800 for married couples. These tax cuts would be distributed to millions of families by reducing tax withholding from workers' paychecks - the money goes directly into Americans' paychecks so they get it right away. Seniors, disabled veterans, other disabled workers, and SSI recipients would receive a one-time payment of $300. 

Tax relief for unemployed workers.In February, the number of Americans claiming jobless benefits jumped to a 26-year high, reflecting the nation's declining job market. The economic recovery plan will alleviate the tax burden for already struggling Americans collecting unemployment benefits by temporarily suspending the federal income tax on the first $2,400 of benefits per recipient. 

College students.The economic recovery plan will help more than 4 million additional students attend college with a new, $2,500 tax credit for families, which is partially refundable. As a result, the nearly one-fifth of high school seniors who currently receive no tax credit will receive a tax cut to make college affordable for the first time. 

Section 529 educational savings plans are enhanced by including the cost of computers as a qualifying expense, along with tuition, books, fees, and other supplies. 

Families with children.The income threshold to receive the refundable Child Tax Credit will be reduced so that more people would be eligible providing a new tax cut for millions of children, and increasing the existing credit for millions more. 

The Earned Income Tax Credit is expanded by providing tax relief to families with three or more children and increasing marriage penalty relief. 

Homebuyers and the housing market.The American Recovery and Reinvestment Act extends and increases the tax credit for homebuyers. This is intended to both help aspiring homeowners and stabilize plummeting home prices. 

AMT relief.The Alternative Minimum Tax patch will protect an estimated 26 million working families from thousands of dollars in additional income taxes for 2009. 

Small business survival and growth.Forthose who rely upon and support their family-run and small businesses, the American Recovery and Reinvestment Act includes targeted measures that will not just help small businesses survive during this challenging time, but enable them to grow in order to maintain and create jobs and contribute to the strengthening of our nation's economy. The legislation provides for an extension of the increase in small business expensing (Section 179); allows a new exclusion on the gain from the sale of certain small business stock; and provides incentives to hire unemployed veterans and disconnected youth (Work Opportunity Tax Credit). 

In addition, the recovery plancontains provisions aimed at freeing up capital for small businesses and making Small Business Administration loans more affordable and accessible. The legislation temporarily reduces or eliminates various lender and borrower fees, bolsters funding for the Small Business Administration's microloan program, increases 7(a) and 504 loan sizes, and temporarily increases the SBA-backed surety amount from $2 million to $5 million.




  • Joi Chaney (224-3232)


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Democratic Policy Committee
419 Hart Senate Office Building Wash. D.C. 20510 (202-224-3232)