The 2009 economic stimulus bill – The American Recovery and Reinvestment Act – was intended to stimulate the economy by getting Americans working and spending again. Here are highlights of this law:
• Tax Credits Paid to Workers Individuals got a tax credit of $400, while couples will got $800. The tax credit payments were spread out in the form of reduced federal tax withholdings taken from workers’ paychecks. For 2009, the tax credit amounted 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 were not eligible for the workers’ tax credits. The credit began to phase out at $75,000 for individuals and $150,000 for couples.
• Retirees A one-time payment of $250 was made to recipients of Social Security, Railroad Retirement, and veterans' benefits.
• Families with Children An expansion of the child tax credit allowed families with children to begin qualifying for the $1,000 tax credit with every dollar earned over $3,000. The change was made to 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 were 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 were able to qualify for an $8,000 tax credit (increased from $7,500). The initial deadline was extended for qualifying home purchases from November 30, 2009 to April 30, 2010. If a buyer entered into a binding contract by April 30, 2010, he or she had until June 30, 2010 to close on the purchase.
• New Car Buyers To help the U.S. auto industry, people who bought new cars, light trucks, and SUVs before Jan. 1, 2010, were allowed to deduct all state and local sales taxes paid on the purchase from their federal income tax. This deduction was 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).
• Unemployed People People getting unemployment compensation during 2009 did not have to pay taxes on the first $2,400.
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