The Obama tax cuts were a series of measures enacted between 2009 and 2013 that reduced federal taxes for most low- and middle-income households, expanded refundable credits for families and college students, and eventually made permanent the lower income tax brackets first passed under President George W. Bush. The centerpiece was the American Recovery and Reinvestment Act of 2009, an $800-billion stimulus package.1U.S. GAO. The Legacy of the Recovery Act Later laws extended or locked in many of those provisions and added two surtaxes on high earners to help fund the Affordable Care Act.
Some of these tax changes have expired. Others are still on your return every year.
What Still Affects Your Taxes Today
The most durable pieces of the Obama-era tax code are the ones Congress made permanent, most of them in the American Taxpayer Relief Act of 2012 (ATRA) and the Protecting Americans from Tax Hikes (PATH) Act of 2015.
Income Tax Brackets for Most Households
ATRA made the lower Bush-era brackets permanent for the vast majority of taxpayers. If your taxable income is below $400,000 (single) or $450,000 (married filing jointly), you pay under the 10, 15, 25, 28, 33, and 35 percent structure. Income above those thresholds is taxed at a restored top rate of 39.6 percent.2Congress.gov. American Taxpayer Relief Act of 2012 The thresholds are indexed for inflation, so they rise each year.
ATRA also brought back two provisions for higher earners: the Personal Exemption Phase-out and the Pease limitation on itemized deductions, both triggered above $250,000 of adjusted gross income ($300,000 joint).3Congressional Research Service. The Fiscal Cliff and the American Taxpayer Relief Act of 2012
Capital Gains, Dividends, and the Estate Tax
ATRA locked in a 15 percent rate on long-term capital gains and qualified dividends for most taxpayers, with a zero percent rate for the lowest two brackets and a 20 percent rate for anyone in the 39.6 percent bracket.2Congress.gov. American Taxpayer Relief Act of 2012
For estates, ATRA set a $5 million per-person exemption (indexed for inflation) with a 40 percent top rate.2Congress.gov. American Taxpayer Relief Act of 2012 That exemption has grown considerably since then; for 2026, the basic exclusion amount is $15,000,000 per person after being increased by subsequent legislation.4Internal Revenue Service. Whats New – Estate and Gift Tax
The Permanent AMT Fix
ATRA ended the yearly ritual of “patching” the Alternative Minimum Tax by permanently raising the AMT exemption amounts and indexing them for inflation. Without the fix, the exemption would have reverted to $33,750 for single filers and $45,000 for married couples, pulling an estimated 27 million additional taxpayers into the AMT.3Congressional Research Service. The Fiscal Cliff and the American Taxpayer Relief Act of 2012
Expanded Child Tax Credit
Before 2009, the refundable portion of the $1,000-per-child credit only started once a family earned above about $12,550. The Recovery Act cut that earnings threshold to $3,000, opening the credit to millions of lower-income families who had been shut out.5Congress.gov. The Child Tax Credit – Legislative History The lower threshold was extended repeatedly and made permanent by the PATH Act of 2015.
Expanded Earned Income Tax Credit
The Recovery Act created a new EITC tier for families with three or more qualifying children, applying a 45 percent credit rate to earned income so the largest families receive noticeably bigger refunds than they would under the two-child rate.6Internal Revenue Service. EITC Eligibility Rules for 2009 Tax Year Outlined The PATH Act made this tier permanent in 2015.7Congress.gov. The Earned Income Tax Credit (EITC) – How It Works and Who Receives It
American Opportunity Tax Credit
The Recovery Act replaced the older Hope Scholarship Credit with the American Opportunity Tax Credit, worth up to $2,500 per student for each of the first four years of college. The credit equals 100 percent of the first $2,000 in qualified expenses plus 25 percent of the next $2,000, and qualifying costs include tuition, fees, and required course materials.8Internal Revenue Service. American Opportunity Tax Credit
Up to 40 percent of the AOTC (a maximum of $1,000) is refundable, so families who owe no income tax can still receive cash back. It phases out above $80,000 of modified adjusted gross income for singles and $160,000 for joint filers. The PATH Act made it permanent.9House Ways and Means Committee. Section-by-Section Summary of the Proposed PATH Act
The Temporary Paycheck Cuts
Two large but short-lived tax cuts put extra money in workers’ paychecks during the Great Recession years. Neither is available today.
The Making Work Pay credit, worth up to $400 per individual or $800 per married couple, ran for tax years 2009 and 2010. The IRS delivered it by adjusting employer withholding tables rather than by mailing checks. It phased out above $75,000 of modified adjusted gross income for individuals and $150,000 for couples.10U.S. Government Publishing Office. H.R.1 – American Recovery and Reinvestment Act of 2009
When Making Work Pay expired, Congress replaced it with a payroll tax holiday for 2011 and 2012, cutting the employee-side Social Security tax from 6.2 percent to 4.2 percent.3Congressional Research Service. The Fiscal Cliff and the American Taxpayer Relief Act of 2012 A worker earning the average wage of about $44,700 in 2011 saved roughly $894 that year. The holiday expired at the end of 2012 and was not renewed.
Time-Limited Provisions You May Still Encounter
First-Time Homebuyer Credit Repayments
The First-Time Homebuyer Credit came in two versions with very different rules. Homes purchased in 2008 qualified for up to $7,500, but the 2008 version worked as an interest-free loan: buyers repay it in 15 equal annual installments of $500, starting with their 2010 return. Selling the home or moving out before full repayment triggers a requirement to pay the remaining balance in a lump sum.11Internal Revenue Service. Repayment of First-Time Homebuyer Credit
The 2009 and 2010 versions raised the maximum to $8,000 and required no repayment if the home stayed a primary residence for at least three years.11Internal Revenue Service. Repayment of First-Time Homebuyer Credit If you claimed the 2008 credit and have not yet paid it off, the remaining installments still appear as additional tax on your return each year until the balance is cleared.
Mortgage Forgiveness Debt Relief
Normally, canceled mortgage debt counts as taxable income. The Mortgage Forgiveness Debt Relief Act let homeowners exclude up to $2 million of canceled debt on a principal residence, and the Obama administration extended it through 2017.12Internal Revenue Service. Home Foreclosure and Debt Cancellation It applied only to debt used to buy, build, or substantially improve the home, not to cash-out refinance proceeds spent elsewhere. Congress has revived versions of the exclusion since, with later iterations capped at $750,000.
Residential Energy Credits
The Recovery Act boosted the Section 25C residential energy credit to 30 percent of qualifying costs for 2009 and 2010, up to a $1,500 lifetime cap. That framework became the template for later expansions. Under current law, reshaped by the Inflation Reduction Act of 2022, the credit remains at 30 percent but operates as a $1,200 annual cap, and the qualifying list now includes electrical panel upgrades and home energy audits.13Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
Business Tax Cuts
Several Obama-era laws let businesses write off equipment faster. The Recovery Act extended the elevated Section 179 expensing limit through 2009, and the Small Business Jobs Act of 2010 doubled the limit to $500,000. The current Section 179 limit has grown to $2,500,000 through inflation adjustments, and 100 percent bonus depreciation has been made permanent for qualifying property acquired after January 2025.14Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets The Tax Relief Act of 2010 raised bonus depreciation to 100 percent for qualifying property placed in service between September 2010 and the end of 2011.
The Work Opportunity Tax Credit, extended repeatedly during the Obama years, gives employers a credit for hiring workers from targeted groups such as veterans, public assistance recipients, and the long-term unemployed. The credit equals 40 percent of the first $6,000 in wages for a qualifying worker who logs at least 400 hours, for a maximum of $2,400 per hire, or up to $9,600 for certain disabled veterans.15Internal Revenue Service. Work Opportunity Tax Credit
The Small Business Health Care Tax Credit, launched in 2010, helps employers with fewer than 25 full-time equivalent employees and average wages below a set threshold offset the cost of employee health coverage. From 2010 through 2013 the credit covered up to 35 percent of premiums. Starting in 2014, when the ACA marketplace launched, the maximum rose to 50 percent for taxable employers and 35 percent for tax-exempt organizations.16Internal Revenue Service. Small Business Health Care Tax Credit and the SHOP Marketplace
The Two Obama-Era Tax Increases Still in Force
Alongside the cuts, two Affordable Care Act surtaxes took effect in 2013 and still apply.
The Net Investment Income Tax adds 3.8 percent to net investment income (interest, dividends, capital gains, rental income, and other passive income) for taxpayers with modified adjusted gross income above $200,000 single or $250,000 joint. The surtax is assessed on the smaller of your total net investment income or the amount by which your income exceeds the threshold.17Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax These thresholds are not indexed for inflation, so more taxpayers cross them each year.
The Additional Medicare Tax adds 0.9 percent to wages and self-employment income above the same $200,000/$250,000 thresholds. Employers must start withholding it once an employee’s wages pass $200,000 in a calendar year, regardless of filing status. If total withholding falls short of what you actually owe (common when two spouses each earn near the threshold), you settle up on your return.18Internal Revenue Service. Additional Medicare Tax
Together, the two surtaxes raised the top federal rate on investment income by 3.8 points and on earned income by 0.9 points, and both still operate under the original thresholds.