President Barack Obama will sign the $787 billion federal stimulus package into law in Denver on Tuesday. The legislation includes billions of dollars in spending on items including infrastructure, education, tax breaks for individuals and businesses, help for unemployed workers and aid for state governments.
Below is a snapshot of some of the individual tax breaks included in the Stimulus bill:
- “Making Work Pay” Tax Credit
The Stimulus bill cuts taxes for more than 95% of working families in the United States. For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families.
How you might benefit: About $116 billion would help people who make less than $75,000 a year (twice that for couples) and who have taxes withheld. Individuals will get $400; couples, $800. Individual beneficiaries will start to see about $15 extra per week in their paychecks starting in July. Next year, the $400-per-person benefit will be spread over 52 weeks, so the extra per paycheck will be closer to $7.50. - Extension of AMT relief for 2009
Each year, Congress creates a temporary fix to keep millions of people from paying the alternative minimum tax (AMT). This bill provides more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount by $70,950 for joint filers and $46,700 for individuals.
How you might benefit: It is not applicable to 2008 taxes due on April 15. Those with 2009 earnings from $200,000 to $500,000 will get about $4,800 in 2010. For incomes of $75,000 to $100,000, the 2010 tax savings will be $500. - Car Buyer Tax Deduction
The bill provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009. This deduction is 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).
How you might benefit: For the rest of 2009, you’ll be able to deduct the state and local sales and excise taxes you pay on the purchase of a new (not used) car, light truck, recreational vehicle or motorcycle. This will be an “above-the-line deduction” – which means that you can take it regardless of whether you itemize other deductions on your tax return. The deduction does not apply on spending above $49,500. - “American Opportunity” Education Tax Credit
The bill provides financial assistance for individuals seeking a college education. For 2009 and 2010, the bill would provide taxpayers with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year.
How you might benefit: Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). - Refundable First-time Home Buyer Credit
Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
How you might benefit: The new law eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and extends the availability of the credit for homes purchased before December 1, 2009. You forfeit the credit if you sell the house within three years.
For a more detailed summary of individual tax breaks included in the Stimulus bill, please contact Sam Leyvas, PBA's director of government affairs, at 800.468.2274 x3437 or sam@probeauty.org.
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