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Yesterday afternoon, the economic stimulus package was signed into law. After weeks of wrangling and lots of speculation, the final bill included $212B in tax cuts along with $575B in spending. So what’s in it for you? What follows is a rundown of some of the major taxpayer benefits.
“Making Work Pay” Credit
While you won’t be getting a stimulus check, individuals earning less than $75k/year (and couples earning less than $150k per year) qualify for a $400 per individual ($800 per couple) tax credit. This credit will be doled out in the form of reduced withholding increasing your take home pay by an estimated $8-$13 per week. Social Security recipients who don’t qualify because they don’t work will receive a one-time $250 payment.
First-Time Homebuyer Credit
I’ve written about this extensively over the past few weeks, so it should come as no surprise that the stimulus package includes an $8, 000 tax credit for first-time homebuyers. This credit is available to first-time homebuyers that purchase a home between January 1st 2009 and November 30th, 2009. This is a refundable tax credit that is phased out for individuals with AGI of $75k or higher and couples with AGI of $150k or higher.
Alternative Minimum Tax Relief
This is a bit of a red herring, as the Alternative Minimum Tax (AMT) would’ve undoubtedly been patched sometime this year whether or not it was included in the the stimulus package. Nonetheless, the fix is in, and a number of “middle income” taxpayers that otherwise might have been snagged will instead escape the evil clutches of the AMT.
Education Tax Credits
The “American Opportunity” education tax credit will take the place of the Hope Credit in 2009/2010. This credit, which is available for the first four years following high school graduation, covers up to $2, 500 in tuition and related costs per year (including school-related book and computer purchases). This credit phases out for single taxpayers with AGI of $80k-$90k and married taxpayers with AGI of $160k-$180k.
Earned Income and Child Tax Credits
The Earned Income Credit (EIC) will be temporarily expanded for families with three or more children. The $1, 000 Child Tax Credit will also be extended to additional low-income families.
Unemployment Tax Break
Individuals receiving unemployment benefits in 2009 won’t have to pay federal income tax on the first $2400 that they receive. Moreover, unemployment benefits will increase by $25/week and will also last longer. There will also be a 65% subsidy of health insurance premiums for the unemployed under the COBRA program.
Sales Tax Deduction for Vehicle Purchases
Individual tax payers with an AGI of less than $125k ($250k for joint filers) will be able to deduct state, local, and excise taxes on the purchase of a new car or truck in 2009 even if they don’t itemize. This deduction applies to the taxes paid on the first $49, 500 of the vehicle’s purchase price.
Purchasers of plug-in hybrid vehicles can qualify for a tax credit of as much as $9, 100. In addition, there will be a number of incentives for individuals who make energy-efficient home improvements.