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The 2009 Stimulus Package: It's Not Just for General Motors!


February 25, 2009

You’ve probably heard that congress passed a modified form of President Obama’s “stimulus package” (actually called “the American Recovery and Reinvestment Act of 2009”). The Act includes nearly $300 billion of tax relief. Perhaps you thought this plan only helps big business, but there are actually many benefits for you, the regular taxpayer.

Here are some of the provisions of the stimulus package that might affect your taxes:

  • Are you buying a house for the first time? - If you bought (or will buy) a house for the first time between January 1 and November 30, 2009, you will be eligible for an $8,000 tax credit. Unlike the previous first-time homebuyer tax credit (still applicable to home purchases made between April 1 and December 31, 2008), you will never have to pay this credit back (as long as you remain in the house at least 3 years). This benefit begins to be reduced if your adjusted gross income is over $75,000 ($150,000 for a joint return).
  • Are you buying a new car? - Purchase a new vehicle between February 17, 2009 and December 31, 2009 and you can deduct any state and local sales or excise taxes on your federal return. Purchase of most brand new motor vehicles, foreign and domestic, weighing no more than 8,500 gross pounds, qualify.
  • Do you get a paycheck? - The Making Work Pay credit will increase your annual take home pay (through reduced withholding) by 6.2% of your earned income (up to $400, $800 if you’re married and filing jointly). As with the First-Time Homebuyer Credit, this credit begins to phase out at $75,000 adjusted gross income ($150,000 for a joint return). If you don’t have taxes withheld from a paycheck, you can still claim the credit on your 2009 tax return.
  • Are you on a fixed income? - Many individuals on fixed incomes (such as those who get a check for retirement, disability, or SSI from Social Security; disabled veterans; and retired railroad workers) will get a one-time Economic Recovery Payment of $250. The payment will come directly from the agency paying benefits to those persons (not the IRS). If the same individual gets the Making Work Pay credit (see above), that credit will be reduced by $250.
  • Are you paying college tuition? The American Opportunity Education Credit (formerly the HOPE credit) provides an increased tax credit for college tuition paid after December 31, 2008. This credit can be as much as $2,500 (up from $1,800 under HOPE) if you make under $80,000 ($160,000 joint filing). Also, if you claim exemptions for a Section 529 Education Savings Plan, you may now also claim the cost of a computer, laptop, or other computer technology when use of such required by the college.
  • Do you have children? The Act increases the refundable portion of the Child Tax Credit for 2009 and 2010. The new income threshold is $3,000. The child tax credit currently gives individuals with dependent children under age 17 at the close of a calendar year a $1,000 per child credit through 2010.
  • Do you pay the Alternative Minimum Tax? The Alternative Minimum Tax (AMT) was meant to force wealthy filers who had so many deductions they paid no tax to have to pay something. Unfortunately, more and more middle class taxpayers were being hit with the AMT. The AMT Patch for 2009 increases the exemption amounts granted in 2008. There are many qualifications and exceptions to the AMT patch, but basically it increased exemptions to $46,200 ($69,950 if married filing jointly or qualifying widow(er); $34,975 if married filing separately).
  • Are you married with children and filing jointly? The number of couples who will qualify for the Earned Income Tax Credit (EITC) has been increased for 2009 and 2010. The new law increases the credit from 40 to 45 percent of the first $12,570 of earned income for taxpayers with three or more qualifying children, and raised the phase-out minimum income by $1,880 for joint filers.
  • Do you receive unemployment benefits? Believe it or not, until now all money received as unemployment benefits has been eligible for federal taxes. The new law temporarily allows you to exclude up to $2,400 of unemployment compensation from your gross taxable income for 2009. Anything above that can still be taxed.
  • Do you get a benefit at work for transit or parking? If your employer compensates you for commuting expenses such as public transportation passes, van pooling, or parking, you may be eligible for an exemption increased from $120 to $230 per month, beginning with March 2009.

To find out if you qualify for any of these new credits and exemptions, visit your local PRO-TAX office.

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