The $787 billion American Recovery and Reinvestment Act (ARRA) of 2009 was signed into law by President Obama today, February 17th. For full details about this 1100 page act, visit www.recovery.gov. I'm impressed that this website was up and running so quickly. The site indicates it will provide detailed, transparent information about where the stimulus funding goes.
So we've seen how the bank bigwigs got their fat bonuses from previous stimulus packages. How will this latest stimulus impact us regular guys, gals and bunnies?
Some Money Back in Our Pockets
Well those of us who still have jobs will be eligible for the cleverly named "Making Work Pay" tax credit, which will give us Federal money back of 6.2% of our 2009 wages up to a maximum of $400 (single) and $800 (married). The credit phases out if your earnings are between $75K and $95K (single) and $150K to $190K (married). You get the money back either by reducing your tax withholdings or by taking a credit on your tax return. Seemed odd that the unemployed don't get this credit, but they get their own stimulus (below).
THE CALIFORNIA 2009-2010 BUDGET HAS BEEN SIGNED, WHICH EFFECTIVELY RENDERS THE FEDERAL "MAKING WORK PAY" TAX CREDIT FUTILE AS MOST OF US WILL SPEND OUR TAX SAVINGS ON CALIFORNIA TAX INCREASES. BUMMER! CLICK HERE TO READ MORE.
Helping the Unemployed
The unemployed will receive some help from ARRA. Unemployment benefits will temporarily increase by $25 per week. The first $2400 of unemployment payments will be free from Federal taxes in 2009. Unemployment benefits will be extended for longer periods for many people (I don't have the details on this as of yet).
Lastly, anyone who has been canned from their job between 9/1/08 and 12/31/09 is eligible for a subsidy of 65% of the cost of up to 9 months' COBRA medical insurance premiums. It phases out if your income is $125K to $145K (single) and $250K to $290K (married). This is a nice benefit but, with all due respect, does a family earning $250K a year really need this subsidy? Our tax dollars hard at work.
First-Time Home Buyer's Credit
Well this is quite a nice incentive to buy a house! $8000 refundable tax credit if you buy a house between 1/1/09 and 11/30/09. Technically the credit is 10% of the purchase price of the house, up to $8,000. CLARIFICATION; This credit is for anyone who has not owned their own home for 3 years up to the purchase date of the new home. This is an outstanding incentive to buy a home this year and basically get most of your closing costs covered by a tax refund! The credit phases out when your income reaches $75K to $95K (single) and $150K to $170K (married).
Last year's 1st timer tax credit was $7500 and it has to be paid back like a loan over a 15 year period. Oddly, the period for that program (4/9/08 to 6/30/09) overlaps the new credit. So any of you who took advantage of the "old" credit last year, you're out of luck and will not be eligible for the new credit. That's the breaks I guess.
Help With Education
The American Opportunity Education Tax Credit is a tax credit of up to $2500 a year for tuition and other college expenses in 2009 and 2010. You claim 100% of the first $2000 spent and 25% of the next $2000 to receive the full credit. This phases out for incomes over $80K (single) and $160K (married). This tax credit replaces the Hope Credit for the next 2 years unless it is extended past 2010.
Tax Preparers' Economic Stimulus
I've just covered some of the key aspects of ARRA above...there's a lot more! Probably the biggest recipients of this latest economic stimulus package are professional tax preparers, who no doubt will be busier than ever interpreting and implementing the new tax laws. Any of you watch the stock market today? It was down 4% but H&R Block was only down 2%...hmmmm...maybe a safe haven stock for these Stimul-laden times.
$250 One-Time Payment to Social Security and Other Federal Benefits Recipients: CLICK HERE