The 2009 economic stimulus bill – The American Recovery and Reinvestment Act – is intended to stimulate the economy by getting Americans working and spending again. Here are some ways the economic stimulus bill might affect you:
• Tax Credits Paid to Workers
Individuals will get a tax credit of $400, while couples will get $800. The tax credit payments will be spread out through the rest of 2009 in the form of reduced federal tax withholdings taken from workers’ paychecks. For 2009, the tax credit will amount to about $13 per week and about $7.70 a week in 2010. Individuals with annual taxable incomes in excess of $100,000 and couples filing jointly with incomes in excess of $200,000 will not be eligible for the workers’ tax credits. The credit begins to phase out at $75,000 for individuals and $150,000 for couples.
• Retirees
A one-time payment of $250 is being made to recipients of Social Security, Railroad Retirement, and veterans' benefits.
• Families with Children
An expansion of the child tax credit will allow families with children to begin qualifying for the $1,000 tax credit with every dollar earned over $3,000. The change will help more low-income families who do not normally pay income tax and families with three or more children to get the child tax credit.
• Middle-Class Families
About 29 million middle-class families will be relieved of the threat of the Alternative Minimum Tax (AMT) burden. Congress created the AMT as a way to make sure wealthy people paid at least some income tax. Since it was never adjusted for inflation, the AMT quickly began to hit the middle class and must be adjusted yearly by Congress.
• First-Time Home Buyers
First-time home buyers will qualify for an $8,000 tax credit (increased from $7,500) if they buy their home before Dec. 1, 2009. As a very important bonus, the repayment requirement of the first-time home buyer tax credit has been removed.
• New Car Buyers
To help the U.S. auto industry, people who buy new cars, light trucks, and SUVs before Jan. 1, 2010, will be allowed to deduct all state and local sales taxes paid on the purchase from their federal income tax. This deduction will be subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return). According to the IRS, purchases made before Feb. 17, 2009, will not be eligible for this special deduction.
More details are available from the IRS at www.irs.gov/newsroom/article/0,,id=204519,00.html.
• Homeowners
Homeowners who install certified energy-efficient windows, furnaces, and air conditioners can qualify for a tax credit equal to 30% of their costs, up to a total of $1,500.
• College Students or Their Parents
College students or their parents can qualify for a tax credit of up to $2,500 for tuition and related expenses during 2009 and 2010.
Also see the Federal Student Aid Primer at http://usgovinfo.about.com/od/moneymatters/a/studentaid.htm.
• Unemployed People
People getting unemployment compensation during 2009 will not have to pay taxes on the first $2,400.
• Small Businesses
Among other provisions, the bill allows a delay of the 3% withholding tax on payments to businesses that sell goods or services to governments and a cut in the capital gains tax for investors in small businesses who hold stock for more than five years.
Businesses that reduce their debt will be allowed to delay some taxes, thus allowing them to obtain additional resources to invest in creating new jobs.
Businesses that create jobs for unemployed veterans or youth who have been out of work and out of school for six months will enjoy tax credits.
Small businesses investing in plants and equipment during 2009 will be allowed to extend the bonus depreciation.
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