Obama’s Stimulus Package Explained: What It Means to You

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taxman.jpgHere’s a quick look at some of the tax breaks the new stimulus plan authorizes (for a more detailed look see the Wall Street Journal):

1. Making Work Pay
tax credit.  An eligible worker would get
6.2% of earned income up to a max credit of $400 (for two income earners it’s
$800).  What this means is that workers
would see an extra $12-$20, per pay check. 
If you make more than $95,000 (single) or $190,000 (couples) you will
not qualify.

2. New homebuyers
will get a tax break in the form of a $8,000 subtraction from the income tax
they owe
(on a principle residence purchased through 11/31/09).  There is a phase our for individuals earning
between $75,000 – $95,000 and couples with an income of between $150,000 –
$170,000.

3. The Alternative
Minimum Tax increases exemption to $46,700 for individuals and $70,950 for couples.

4. If you’ve lost your
job you will be able to forgo taxes on the first $2,400 of unemployment
compensation
(in previous years, all income from unemployment was taxable).

5. Cars buyers get
to deduct sales tax on a new car purchase. (for purchases up to $49,500 from
the day the stimulus starts through the end of 2009).  Of course, the deduction phases out for
singles with a salary between $125,000 – $135,000 and couple earning between
$250,000 – $260,000.

6. If you’ve lost
your job, maintaining insurance through your old provider got easier in the
form of a 65% reduction in cost.  Cobra
costs also get cheaper.  There are also
qualification in terms when you got laid off.

7. The American
Opportunity education tax credit allows for a $2,500 partially refundable tax
credit to cover all four years of college
. (this goes until 2010 and thereafter
the Hope Credit comes back into play).

8. If you have a 529
college savings plan you can use withdrawals in 2009 and 2010 to purchase a
computer or “computer technology
” (previously the college needed to stipulate
that a computer was needed for study). 

2 Comments

  1. this was very informative

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