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The American Recovery and Reinvestment Act of 2009

Update: Allsup Outlines COBRA, Medicare Issues with ARRA

Read more in these sections:
COBRA and the American Recovery and Reinvestment Act of 2009
Quick Facts about Medicare and ARRA

Many individuals and families, including you and yours, will benefit from the $787 billion economic stimulus package enacted Feb. 17, 2009. In fact, some components of the plan are designed to specifically benefit those with disabilities.

To help you, Allsup has provided more details below about the American Recovery and Reinvestment Act of 2009 (the Act).


One-time $250 payment if you are on SSDI

Amount: $250
Who gets it: People getting Social Security benefits, including SSDI and SSI.
Details: You must have been receiving these benefits between Nov. 1, 2008, and Jan. 31, 2009.
When: Payments will be sent out to you by late May.
How: This is a separate payment. You'll get it in the same way you get your monthly benefit (i.e., check, direct deposit). No action is needed on your part.
Special notes: If you also get the Making Work Pay (MWP) tax credit (see below), then the $250 will be deducted from the MWP amount.

Making Work Pay tax credit

Amount: $400 max. for individuals each year, 2009 and 2010 $800 max. for couples filing jointly each year, 2009 and 2010
Who gets it:
  • If you have earned income from a job or are self-employed.
  • You are eligible for the credit if you do not earn more than $75,000 (for individuals) or $150,000 (for couples filing jointly).
Details: This is a refundable tax credit of 6.2 percent of your earned income.
When: When your employer adopts the new credit, you will see an increase in your paycheck because the tax you previously paid has been lowered. The tax credit is retroactive to Jan. 1, 2009, and extends through 2010.
How: You'll see less money taken out of your paycheck. No action is needed on your part, unless you are self-employed.
Special notes
  • Check with your tax professional if you are concerned you will owe too much at the end of the year due to this payroll reduction.
  • You also could wait until the end of the year to claim the credit on your tax return.
  • Lower income workers who do not owe taxes may be eligible for the full refundable credit.

Increased unemployment benefits

Amount: $25 per week
Who gets it: If you are getting unemployment benefits and your state requests this additional money.
Details: If you are on unemployment, you also can get 33 weeks of extended benefits through February 2010.
When: The $25 increase may begin as early as March 2009.
How: You'll see the additional money in your unemployment check. No action is needed on your part.
Special notes: The first $2,400 in unemployment compensation will not be counted toward your 2009 gross income. Prior to the Act, all unemployment payments were taxable.

Lower COBRA premium costs

Amount: Get a 65 percent reduction in your COBRA premiums. You only pay 35 percent of your premium cost, instead of 100 percent.
Who gets it:
  • Anyone who was involuntarily terminated from Sept. 1, 2008, through Feb. 28, 2010.
  • You are eligible if you do not earn more than $125,000 if you are single or $250,000 for couples filing jointly.
Details: For the first 15 months of your COBRA coverage, the federal government will cover the remaining 65 percent.
When/how: After your former employer adopts the changes, you'll be notified about your premium reduction. Contact your former employer for details.
Special notes: If you initially declined COBRA and qualify under the terms, you should be notified by your employer about your eligibility. Then you will have 60 days after receiving notification to sign up under the reduced-premium provision.

First-time homebuyer credit

Amount: $8,000
Who gets it:
  • First-time homebuyers.
  • Homebuyers who have not owned a home for three years or longer.
  • You are eligible if you do not earn more than $75,000 for individuals or $150,000 for joint filers for purchases before Nov. 6, 2009.
  • New income limits for purchases after Nov. 6, 2009: $125,000 for individuals or $225,000 for joint filers; and those with incomes between $125,000 - $145,000 (individuals) and $225,000 - $245,000 (joint filers) will receive a reduced credit.
Details: For homes bought Jan. 1, 2009, through Apr. 30, 2010
When/how: Qualified homebuyers can claim the credit on their 2008 or 2009 tax returns.
Special notes: You do not have to repay the amount if you live in the home for 36 months or longer after the purchase date. This is a change from the previous first-time homebuyer credit. Also, long-time residents can get a $6,500 credit as first-time homebuyers if you lived in the house you are selling for five of the last eight years from the date of purchase of your new primary home. Contracts must be entered into by Apr. 30, 2010, and closing must occur by June 30, 2010.

Deduction for buying a new car

Amount: Total state and local sales taxes or excise taxes paid for your new car.
Who gets it: Anyone buying a new car, truck, motor home or motorcycle; any make or model.
  • Taxes can be deducted on a purchase price up to $49,500.
  • Vehicles must be bought between Feb. 17, 2009, and Dec. 31, 2009.
When/how: Qualified homebuyers can claim the credit on their 2008 or 2009 returns.
Special notes:
  • If you itemize on your tax return and claim the existing itemized deduction for state and local taxes, you are not eligible for this deduction. (You can calculate which option is better for you.)
  • This deduction is phased out for buyers with adjusted gross income exceeding $125,000 for individuals or $250,000 for joint returns.
  • It is estimated that on a $25,000 vehicle, the buyer would save $1,500.

Child tax credit

Amount: 15 percent of annual income (up to $1,000) per child under age 17 in 2008
Who gets it: Any working family with a child. However, now extremely low-income families are eligible.
Details: For the 2009 tax year, you could get a refundable credit equal to 15 percent of your income over $3,000.
When/how: Qualified families can claim the credit on their annual tax returns.
Special notes: A refundable credit means you do not have to pay or owe taxes to receive it. The IRS can issue a payment to you. The tax credit will be reduced if you make more than $55,000 as married, filing separately; $75,000 as single and head of household; or $110,000 if married filing jointly.

Earned Income Tax Credit

  • Families with low income and three or more children under the age of 19 (under 24 if a full-time student, or any age if the child is disabled) get a temporary increase in the Earned Income Tax Credit (EITC) for 2009 and 2010.
Who qualifies Earned Income must be less than... Maximum cap
Families with three or more children $43,279 and $48,279 if married Up to $5,657
Families with two children $40,295 and $45,295 if married Up to $5,028
Families with one child $35,463 adn $40,463 if married Up to $3,043
Families with no children $13,440 and $18,440 if married Up to $457

College education tax credit

Amount: $2,500 credit per year toward qualified tuition and related expenses, in 2009 and 2010.
Who gets it:
  • College students.
  • Parents are eligible for the credit if they do not earn more than $80,000 (single filers) or $160,000 (joint filers).
Details: The credit can be claimed for four years, but is reduced to $1,800 per year in 2011 and later.
When/how: If you qualify, you can claim the credit on your annual tax returns.
Special notes: The Hope education credit has been renamed the American Opportunity Tax Credit. The ARRA expands the definition of qualified higher eduction expenses to include "computer technology or equipment."

Energy tax credit

Amount: Increased to 30 percent of the price of qualified items; with a cap of $1,500 for purchases in 2009 and 2010.
Who gets it: Anyone making qualified home improvements, including new furnaces, water heaters, windows and exterior doors on existing homes.
Details: The improvements must have been made during 2009 or 2010.
When/how: If you qualify, you can claim the credit on your annual tax return.
Special notes: The credit is claimed on IRS Form 5695.

Home weatherization funds

Amount: $6,500 per house is the maximum amount (formerly $3,055) that can be spent on home improvement services provided by the U.S. Department of Energy's Weatherization Assistance Program.
Who gets it: Everyone may apply, but preference is given to:
  • People over 60 years of age.
  • Families with one or more person with a disability.
  • Families with children (in most states).
  • Anyone receiving SSI or Aid to Families with Dependent Children -automatically qualify.
  • Low-income families - automatic qualification according to income limits set by each state (criteria vary, but level has been raised).
  • Other factors affect eligibility; contact your state office.
Details: $210 million is now available for these improvements.
When/how: Anyone interested in participating should contact their local weatherization office. The DOE makes a state-by-state listing available online:
Special notes:
  • Under this program, local service providers install energy efficiency items such as upgraded insulation, heating and cooling systems, air filters and windows.
  • The program is coordinated at the state level, so you cannot sign up by calling the DOE. Go online or call your local library for assistance.
  • The DOE estimates annual energy savings at $413 per family.
  • Find more online at:

Food assistance

  • Nearly $20 billion is being provided to expand the Supplemental Nutrition Assistance Program (SNAP), formerly referred to as food stamps. The 13.6 percent increased SNAP benefits are expected to begin in April.
  • Elderly nutrition and Meals on Wheels programs are receiving $100 million.
  • Emergency Community Food and Shelter programs are receiving $100 million.
  • The Emergency Food Assistance Program is receiving $150 million to restock food banks.

Allsup will continue to provide you with information on the tax benefits available to you during this tax season, especially as U.S. government agencies, businesses and employers implement the American Recovery and Reinvestment Act of 2009.