Roughly 97% of taxpayers will receive tax relief as part of President Obama’s American Recovery and Reinvestment Act-or the stimulus bill. But let's cut through the red tape- what does this REALLY mean for your family?
TAX LINGO LESSON:
A “credit” reduces the dollar amount of tax you owe. A “deduction” reduces the amount of your income that is taxable.
Here are a few of the tax breaks that could affect your wallet in a good way:
The “Making Work Pay” credit equals up to $400 per person (or $800 per couples who file jointly). Millions of workers may see as much as $13 extra (or $65 per month) in their weekly paychecks.
Parents with children in college – and some adult students — could get expanded tax credits of up to $2,500 to help cover tuition and related expenses in 2009 and 2010.
People who buy new cars in 2009 can deduct the sales taxes from their taxable income.
First-time homebuyers could get a tax credit of up to $8,000 if they buy homes between Jan. 1 and Dec. 1 (not December 31st) of 2009.
Existing homeowners can get back 30% of the expenses (up to $1,500) of making their homes more energy-efficient in 2009 or 2010.
For low-income families:
For the unemployed:
The first $2,400 of unemployment benefits will be tax free.
A one-time $250 payment for retirees, disabled individuals and others who are unemployed.
For those laid off between Sept. 1, 2008, and Dec. 31, 2009 and who made $125,000 or less ($250,000 for couples filing jointly), the government will subsidize 65% of their premiums under COBRA for up to 9 months.
For those who did not sign up for COBRA, they will get an additional 60 days to do so and receive the subsidy.
For those whose regular unemployment benefits have expired may sign up for an additional 20 weeks, (and 13 additional weeks if they live in approximately 30 “high unemployment” states)
The weekly unemployment benefit will temporarily increase by $25
For higher-income families:
For small business owners:
Small businesses owners with revenues under $15 million will be able to offset recent losses against the profits made in the previous five years, instead of two, making them eligible for potential tax refunds.
Businesses buying equipment (computers, etc.) can accelerate the depreciation on these items through 2009 providing a great incentive for companies to upgrade equipment.
Please keep in mind that many of the tax breaks in the stimulus plan only apply for your 2009 tax return — not the current tax filing season. Furthermore, there may be restrictions that prevent you from receiving some or all of these credits. Please consult a professional tax advisor for more information about your personal tax scenario.
Critics of the stimulus package believe that spending is not the answer but supporters are thankful for the relief and believe that drastic measures are needed to slow the recession.
What do you think? Are they all necessary? Will they help? Which tax break benefits you the most?