What's In the Stimulus Package For You?

President Barack Obama has signed into law the $787 billion stimulus package. The plan, is aimed at lifting the economy out of recession and intends to create millions of jobs and boost consumer spending. Below we have summarized most of the benefits that pertain to individuals and homeowners.

First-Time Home Buyer Tax Credit

In 2008, the Federal Government through the Housing and Economic Recovery Act of 2008 authorized a first-time homebuyer tax credit of $7,500. The stimulus package of 2009 made some significant changes:

  • Increased the tax credit to $8,000.
  • No longer required to pay back the tax credit as long as you stay in your home for 3 years.
  • Tax credit phases out for individuals making more than $75,000 or couple earning more than $150,000.
  • Most types of primary residences qualify including mobile homes and house boats.
  • Tax credit will reduce your tax liability and/or refund you money if you don't owe any taxes.

Although the tax credit did not turn out to be as much as had been hoped for, it is still a great opportunity for first-time homebuyers. For the complete details see this article-$8,000 Tax Credit for First Time Homebuyers

Making Work Pay Credit

The making work pay credit is essentially a $400 tax credit for individuals or an $800 tax credit for couples. It is calculated by taking 6.2% of your earned income up to the amounts cited above. Many employers will probably begin adjusting their withholding sometime this year so that it will work out on average to about $15 per pay check if you are paid twice per month. Also, self-employed individuals can adjust their quarterly tax payments to reflect the credit. The credit begins to phase out to anyone making more than $75,000 per year and couples making more than $150,000 per year. As it stands now, the credit is for the years 2009 and 2010.

Finally, for retirees not eligible for the Making Work Pay credit, Congress created a one-time payment of $250. The checks are supposed to go out no later than June 17, 2009.

Car Buyer Tax Deduction

To stimulate auto buying, you will able to deduct state and local sales tax on new vehicles purchased on the day the legislation becomes law and throughout the rest of 2009. This applies to new cars, light trucks, recreational vehicles or motorcycles. This deduction is meant for everyone, thus you can take it regardless of whether you itemize other deductions on your tax return. This tax deduction phases out for single people with adjusted gross income over $125,000 or $250,000 for married couples. Finally the deduction does not apply on vehicles that cost more than $49,500.

Unemployment Benefits

In 2009 only, the first $2,400 of unemployment benefits will not be subject to income taxes. Workers losing their jobs from Sept. 1 2008 through the end of 2009 can get help with insurance premiums under COBRA, the federal law that allows you to keep coverage under an old employer's plan. The government will subsidize 65 percent of the premium cost while you will pay the remaining 35 percent of the premium cost. Your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples.

Higher Education Tax Credit for Students

This is another "refundable tax credit" which means it is designed to help people who pay little or no taxes as well. This $2,500 tax credit covers the cost of college tuition and other related expenses in 2009 and 2010. You must spend at least $4,000 in a single year to get the full credit. Also, the credit phases out for individuals earning over $80,000 or $160,000 for married couples.

Tax Credits for Energy Efficient Home Improvements

Home improvement tax credits are now available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Home improvement tax credits up to $1,500 (raised from $500) are available for insulation, replacement windows, water heaters, certain high efficiency heating and cooling equipment, and biomass stoves. Also, the percent of the cost versus the project has been raised from 10% to 30%. For more information, see the Dept of Energy's Energy Star program http://www.energystar.gov/index.cfm?c=products.pr_tax_credits

This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.

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Source: Treasury.gov