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What’s In the 2009 Stimulus Package for You?

March 17, 2009 | Taxes | No Comments
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President Obama signed the American Recovery and Reinvestment Act into law February 17, 2008. The good news is that the stimulus bill gives tax breaks to a large portion of Americans of all ages and income levels, as well as to businesses.

According to the White House, the new American Recovery and Reinvestment Act will give tax breaks to 95 percent of workers and their families through the Making Work Pay Credit.

The law contains many other tax breaks that should provide a financial boost to everyone from the unemployed and low-income, to families with children and children in college, to first-time homebuyers, and taxpayers buying new cars.

Below is who will cash in on the stimulus package:

Workers

Workers and the self-employed will get a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers and up to $800 for couples filing jointly.

Unemployed

The new bill makes the first $2,400 of unemployment income nontaxable.

First-time homebuyers

First-time homebuyer increases from $7,500 to $8,000 for primary residences purchased between January 1, 2009 and November 30, 2009, and eliminate the requirement that the credit be repaid, as long as the house isn’t sold within three years.

College students

The Hope Credit for college costs is increased to $2,500 for 2009 and 2010, covering 100 percent of the first $2,000 of tuition and related expenses per year and 25 percent of the next $2,000.

The credit is available for all four years of college, up from only two years, and covers the cost of books. It is 40 percent refundable, and begins to phase out at $80,000 of Adjusted Gross Income for singles and $160,000 of Adjusted Gross Income for married couples.

New car buyers

Buyers of new cars, light trucks, SUVs, motorcycles and motor homes during 2009 can deduct the state sales or excise tax they pay, even if they don’t itemize their deductions.

This break starts phasing out for single taxpayers with Adjusted Gross Income over $125,000 and couples with AGI over $250,000.

Families

More couples who file jointly and have children will qualify for the Earned Income Credit. The tax package starts the phase-out range at $21,420, an increase of $1,880. Also in 2009, the credit increases for families with three or more children to 45 percent of the first $12,570 of earned income, up from 40 percent.

Plus, the Child Tax Credit will cover more low-income earners: For 2008, the credit is refundable to the extent of 15 percent of an individual’s earned income in excess of $8,500; for 2009 and 2010, that floor drops to $3,000.

Retirees, veterans and the disabled

Because the payroll tax credit only goes to employees and the self-employed, the bill adds something for others as well: a one-time payment of $250 to recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income payments, and pension and disability benefits from the Veterans Administration.  Government retirees who don’t get Social Security will also get a one-time refundable tax credit of $250 in 2009.

Homeowners

The 10 percent tax credit for energy-saving home improvements climbs to 30 percent and is extended through 2010. Improvements that qualify for the credit include energy-efficient skylights, windows and outer doors, along with energy-saving water heaters, central air conditioners and biomass stoves.

The bill also eliminates individual credit caps for the different types of property, and instead imposes a $1,500 cap on all qualifying property.

Middle-income taxpayers

To keep millions of middle-income taxpayers from being forced to pay the Alternative Minimum Tax (AMT) for 2009, the measure increases the minimum tax exemptions to $70,950 for couples filing jointly and $46,700 for single filers. Otherwise, the exemptions would top out at just $45,000 for couples and $33,750 for singles.

Small businesses

Special 50 percent, first-year bonus depreciation is revived for assets bought and placed in service during 2009. Businesses that averaged $15 million or less in gross receipts over the past three years will be allowed to carry back losses for five years instead of two. The easing applies only to 2008 losses.

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