Impact of ARRA on Virginia
Virginia will receive approximately $4.8 billion in direct appropriations from the ARRA. However, that amount does not include tax cuts, which will aid Virginia citizens directly. Additionally, a large portion of the funds will be in the form of competitive grants that have yet to be awarded.
The economic recovery plan provides much needed help to Virginians seeking assistance coping with job loss, health care costs, and other issues. Also, through a wide array of tax credits, ARRA provides a boost to individuals looking to buy their first home, purchase a new vehicle, lower energy bills, or pursue a higher education.
- Taxpayer Relief. The “Making Work Pay” tax credit provides individuals earning up to $75,000 with a $400 tax credit in 2009 and 2010. Married couples filing jointly and earning up to $150,000 will receive an $800 tax credit.
- Retirees, Disabled Individuals and SSI Recipients, Disabled Veterans and Railroad Retirees. A one-time payment of $250 is available to all of these individuals.
- Federal and State Pensioners. A one-time refundable tax credit of $250 is available to certain government retirees who are not eligible for Social Security benefits.
- Earned Income Tax Credit (EITC). Two changes were made to this credit. The credit was increased to forty-five percent of a family’s first $12,570 of earned income for families with three or more children. Also, the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) was increased by $1,880.
- Child Tax Credit. The Act increases the eligibility for the refundable child tax credit in 2009 and 2010. For 2008, the child tax credit is refundable up to 15 percent of the taxpayer’s earned income in excess of $8,500. The provision would reduce this floor for 2009 and 2010 to $3,000; therefore this provision makes the credit refundable up to 15 percent of the taxpayer’s earned income in excess of $3,000.
- "American Opportunity" Education Tax Credit. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).
- Computers as Qualified Education Expenses in 529 Education Plans. Computers and computer technology now qualify as education expenses under the Virginia College Savings Plan.
- Refundable First-time Home Buyer Credit. First-time homebuyers in 2009 may be eligible for a tax credit up to $8,000 that does not have to be paid back. This provision also removes the prohibition on financing by mortgage revenue bonds and extended the availability of the credit for homes purchased before December 1, 2009. The credit would be recaptured if the house is sold within three years of purchase.
- Sales Tax Deduction for Vehicle Purchases. This deduction impacts state and local sales and excise taxes on new car, light truck, recreational vehicle and motorcycle purchases in 2009. This deduction is subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).
- Temporary Suspension of Taxation of Unemployment Benefits. There will be no federal income tax on the first $2,400 in unemployment benefits received by an individual in 2009.
- Extension of Alternative Minimum Tax (AMT) Relief for 2009. AMT relief will be extended through 2009 for nonrefundable personal credits and exemption amounts will be increased to $70,950 for joint filers and $46,700 for individuals.
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