How the American Recovery and Reinvestment Act Addresses Women's Needs: Tax Benefits for Individuals and Families

Tax Benefits for Individuals and Families

In addition to direct spending for the programs described above and other investments, the Act provides billions in tax cuts for individuals, including expanded tax benefits for low- and moderate-income working families. For 2009 and 2010, the Act:

• Reduces the eligibility threshold for the refundable component of the child tax credit from $8,500 to $3,000, enabling families of 2.9 million children to become newly eligible for the credit and those of 10 million children to receive a larger credit.
• Increases the Earned Income Tax Credit for families with three or more children and reduces the marriage penalty in the EITC.
• Creates a new refundable Making Work Pay credit worth up to $400 for an individual and $800 for a couple, starting to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks or through claiming the credit on the tax return they file next year.
• Replaces the Hope Scholarship credit with an American Opportunity Tax Credit to help pay expenses for higher education, worth up to $2,500 a year and partially (40%) refundable. This credit starts to phase out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).

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