The Stimulus and You
In recent months, our nation’s leaders have worked tirelessly to address the needs of the people in this economic downturn. On February 17th, President Obama signed into law The American Recovery and Reinvestment Act of 2009. At this point, you may be saying to yourself, “Sure, this stimulus package appeals to the lower and middle classes, even the affluent, but what about the mega wealthy? What are they: chopped liver?” No. And please, they will neither understand nor acknowledge the chopped liver reference. Breaking news:Paul Allen, the billionaire co-founder of Microsoft may be eligible to save hundreds of millions in taxes over the next few years, thanks to a provision in the Act. Rest assured that this stimulus plan fairly serves us all.
What does this stimulus plan mean for you? Here are featured items that you may find beneficial:
- The “Making work pay” refundable tax credit of up to $400 per individual and $800 for couples in 2009 and 2010. It is calculated at a rate of 6.2 percent of earned income and is phased out for individuals with adjusted incomes over $75,000 and couples with incomes over $150,000.
- Health Insurance subsidy. Starting in March 2009, the subsidy will pay 65% of your monthly COBRA bill directly to the employer (in the form of a payroll tax credit), once you have paid 35% of the bill. If you did not originally elect to continue your insurance coverage under COBRA, your former employer is now required to give you another chance to sign up.
- Tax deduction for the sales taxes you pay on your car. This deduction phases out for cars costing more than $49,500, and for households earning more than $125,000 for single taxpayers and $250,000 for joint filers.
- The “American Opportunity Tax Credit” allows up to $2,500 in tax credits to college students for the 2009 and 2010 tax years. It also allows students to take the credit for related expenses like textbooks. The credit phases out for individuals earning more than $80,000 and couples with incomes over $160,000.
- New credits of up to $1,500 for 30 percent of the cost of home improvements that increase energy efficiencies. That includes everything from fuel efficient stoves and hot water heaters to skylights, insulation and replacement windows.
- Increase in the earned income tax credit for low-income workers with three or more children.
- Increase in eligibility for the refundable child tax credit to more low-income workers. The bill reduces the income floor to $3,000 in 2009 and 2010 from the current floor of $8,500.
- The $8,000 tax credit for first-time home buyers for homes purchased between Jan. 1 and Dec. 1, 2009. The tax credit phases out for individuals earning more than $75,000 and couples earning more than $150,000.
To learn more about the American Recovery and Reinvestment Act, visit www.Recovery.org.
Brad Lazarus – OWC Personal Finance Expert
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