The new American Recovery and Reinvestment Act of 2009 includes numerous tax breaks for both individuals and businesses. In general, the changes are retroactive to January 1, 2009. Here is an overview of several key provisions.

Making Work Pay credit: An employee or self-employed individual may claim a credit equal to the lesser of 6.2% of earned income (or $400 for single filers) or $800 for joint filers. This new credit, which is available for 2009 and 2010, begins to phase out if your modified adjusted gross income (MAGI) is $75,000 or more for single filers and $150,000 for joint filers.

Alternative minimum tax: Congress "patched" the alternative minimum tax (AMT) again for 2009 by extending the use of personal credits to offset AMT liability and slightly increasing the exemption amounts. The exemption amounts for 2009 are $46,700 for single filers and heads of household (up from $46,200 for 2008) and $70,950 for joint filers and surviving spouses (up from $69,950 for 2008).

New car deductions: Under the new law, you can claim an above-the-line deduction for the sales and excise taxes attributable to the first $49,500 of a new vehicle's purchase price. The deduction begins to phase out for an MAGI exceeding $125,000 for single filers and $250,000 for joint filers. It is only available for purchases between February 17, 2009, and December 31, 2009.

• The maximum credit is increased to $8,000 (up from $7,500 for 2008) for purchases after December 31, 2008, and before December 1, 2009.
• Unlike the previous credit for 2008, you are not required to repay the credit over 15 years, as long as you live in the home for at least three years.

However, note that the credit for 2009 still begins to phase out for an MAGI exceeding $75,000 for single filers and $150,000 for joint filers.

Education credit: The Hope education credit is enhanced for 2009 and 2010 and renamed the "American Opportunity Tax Credit." For starters, the maximum credit is increased to $2,500 (up from $1,800 for 2008) and will be available for all four years of study. Furthermore, the phaseout thresholds are boosted to $80,000 of MAGI for single filers and $160,000 for joint filers.

Depreciation deductions: Under the Economic Stimulus Act of 2008, the Section 179 deduction limit was increased to $250,000 for 2008, with a phaseout threshold of $800,000. These figures were scheduled to revert to lower levels. The new law preserves the higher limits for qualified assets placed in service in 2009. It also extends the 50% bonus depreciation deduction for another year. This results in an $8,000 increase in the "luxury car" dollar caps.

Net operating losses: Normally, your company can carry back net operating losses (NOLs) for a period of just two years. Under the new law, the NOL carryback period is extended to as long as five years for a qualified small business with average gross receipts of $15 million or less. This change is effective for NOLs in tax years beginning or ending in 2008.

S corporation conversions: The built-in gains (BIG) tax applies to sales of appreciated assets after a C corporation converts to S corporation status. Normally, the holding period for assets subject to the BIG tax is ten years, but the new law reduces it to seven years for gains realized in tax years beginning in 2009 and 2010.

Work Opportunity Tax Credit (WOTC): Employers may claim a maximum $2,400 credit for hiring a worker from designated disadvantaged groups. The new law adds two new categories, disabled veterans and disconnected youth, for workers hired and starting work in 2009 and 2010.Retiree payments: The new law provides a one-time payment of $250 to taxpayers living on a fixed income, such as Social Security recipients, railroad retirees, disabled veterans and certain government retirees.

Unemployment benefits: For 2009 only, no income tax is imposed on the first $2,400 of unemployment benefits received by a worker who loses his or her job.

Energy tax incentives: The new law also includes a slew of tax benefits for making various energy-saving improvements to a residence or business.This is just the tip of the iceberg. Obtain guidance from a professional tax adviser.