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| You and the Stimulus
The stimulus provides a number of benefits directly to individuals in the form of tax cuts, tax credits, tax incentives and other. In addition the newly announced Homeowner Stability and Affordability Plan provides significant benefits for homeowners unable to refinance their homes, those delinquent in their mortgages, and those whose financial condition has changed making them likely to default on their mortgage obligations. Please check the Housing Plan page for details. Here is a summary of the benefits proposed under the stimulus act that related to individual tax payers:
Making Work Pay - Refundable income tax credit
The formula for the "Making Work Pay" refundable income tax credit is rather simple, anybody paying taxes (this includes those that only pay payroll taxes - social security, and medicare) will receive $400 in tax credits, and married couples $800 - there are income restrictions.
The following tables provide an illustration of the tax provisions under the "Make Work Pay" provision - (Please note: tables and commentary are for information and illustration purposes only and DO NOT constitute tax advice - please consult a tax expert on the matter):
Making Work Pay - Refundable Income Tax Credit
| Single Return
| Joint Return |
| The lesser of
| 6.2% | 6.2% | of gross income, or
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| $400
| $800
| | | For gross incomes up to | $75,000 | $150,000
| | Above that it will be reduced by 2% of the excess,
so the maximum adjusted gross income before the
tax credit disappears is:
| $95,000
| $190,000
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Source: H.R. 1 Bill; Tables are for illustration purposes only - they do NOT constitute tax advice - please consult a tax expert
Expanded Earned Income Tax Credit (EITC)
For taxpayers earning less than $58,279, the Earned Income Tax Credit (EITC) provides relief in the form of a credit. The stimulus expands eligibility by increasing the limits allowed so that more people could qualify for these credits, and increases the credit for families with three or more children. The new formula follows the table below (provided for illustration purposes - please consult a tax advisor): Earned Income Tax Credit
| Maximum EITC
| Min Gross Income for Maximum Amount | Max Gross Income for Maximum Amount | Phase Out Income
| | Single taxpayer with no qualifying children (7.65% of earnings up to Min Gross Income Amount) | | Joint filing taxpayer with no qualifying children ( 7.65% of earnings up to Min Gross Income Amount) | | Single taxpayer with 1 qualifying child (34% of earnings up to Min Gross Income Amount) | | Joint filing taxpayer with 1 qualifying child (34% of earnings up to Min Gross Income Amount) | | Single taxpayer with 2 qualifying children ( 40% of earnings up to Min Gross Income Amount) | | Joint filing taxpayer with 2 qualifying children ( 40% of earnings up to Min Gross Income Amount) | | Single taxpayer with 3 or more qualifying children (45% of earnings up to Min Gross Income Amount) | | Joint filing taxpayer with 3 or more qualifying children (45% of earnings up to Min Gross Income Amount) |
| | $457 | | $457 | | $3,043 | | $3,043 | | $5,028 | | $5,028 | | $5,657 | | $5,657 |
| | $5,970 | | $5,970 | | $8,950 | | $8,950 | | $12,570 | | $12,570 | | $12,570 | | $12,570 |
| | $7,470 | | $12,470 | | $16,420 | | $21,420 | | $16,420 | | $21,420 | | $26,420 | | $31,420 |
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| $13,444 | | $18,444 | | $35,463 | | $40,463 | | $40,295 | | $45,295 | | $53,279 | | $58,279 |
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Source: H.R. 1 Bill; IMPORTANT NOTE: tax credits are valid for tax years 2009 and 2010. Tables are for illustration purposes only - they do NOT constitute tax advice - please consult a tax expert
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| | Child Tax Credit
For people for whom the child tax credit ($1,000 per child) exceeds their tax liability, the taxpayer can claim a refundable credit equal to 15% of their income in excess of $3,000 for the years 2009 and 2010 (the regular threshold is $12,550. Supplemental Income for Retirees and Veterans
Retired individuals, people receiving Supplemental Security Income, veterans and railroad retirees will receive a one time payment of $250 - $500 for married couples. Alternative Minimum Tax (AMT) Relief
AMT relief comes in the form of higher deductibles: $70,950 for married individuals filing jointly, $46,700 for single people, and $35,475 for married people filing separately.
First-Time Home-Buyer Credit
First-time home-buyers - individuals that have not owned a primary residence for the last three years - are allowed a tax credit equal to the lesser of $8,000 ($4,000 for a married individual filing separately) or 10 percent of the purchase price of the principal residence. In addition, first-time homebuyers do not need to repay the credit. This is valid as long as the home is purchased between 1/1/09 and 12/1/09.
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| COBRA Subsidy
The ARRA provides a subsidy
for laid off workers (between 9/1/08 and 2/28/10) that are eligible for
COBRA health insurance benefits. The government will subsidize 65% of
the premium for 15 months at a cost of over $44 billion. Legislation signed
in late December 2009 expanded coverage to 15 months from 9 and
eligibility to February 28, 2010. The House of Representatives passed an extension of coverage eligibility until June 30, 2010, but it is yet to be debate by the Senate.
Individuals who had seen their 9 month period expire before the recent extension to 15 months and who
- have failed to continue making payments of their full unsubsidized premiums (and had thus lost COBRA coverage) have the option of making retro-active payments to maintain COBRA coverage.
- continued making payments - are eligible for a retroactive refund consistent with the subsidy extension.
Companies are required to make the subsidy payments on behalf of their COBRA eligible employees, and are reimbursed by the Federal Government. Eligible workers should contact their employers for questions relating to the subsidy and eligibility.
Deduction of State Sales Tax for Purchase of a New Vehicle
People planning to buy a car or light truck between 11/12/2008 and 1/1/2010, you are most likely eligible to receive a credit for state sales and excise taxes as long as the vehicle does not exceed $49,500. American Opportunity Tax Credit - Educational Tax Credit
The bill provides for educational tax credits for tuition expenses and computer equipment used for coursework. The provision allows for a tax credit of up to $2,500 for individuals spending $4,000 or more for post-secondary educational expenses (100% of the first $2,000 and 25% of the next $2,000). Unemployment Benefits
Workers laid off prior to February 28, 2010 will receive an increase to their unemployment benefits of $25 per week, and will be able to extend the benefit period up to an additional 73 weeks in addition to you state's basic unemployment insurance period (depending on the state you may have 20-26 weeks of unemployment benefits covered by the state). The $25 extended benefit will be payable up to July 31, 2010 for unemployed workers eligible to continue receiving the extended benefit after February 28, 2010. Food Stamps
People eligible for food-stamps will see a 13% increase in benefits. Energy Conservation Tax Credit
For 2009 and 2010, individuals will be able to deduct up to 30% of the cost of making their homes more energy efficient up to a total of $1,500.
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