President Obama's stimulus package is making it's way through the House, through the Senate, back through the House and through the Senate for a final vote. The final stimulus bill will probably end up costing $787 billion dollars, pushing the nation's debt level higher. There are $281 billion in tax cuts for business and individuals and over $500 billion in government spending.
What's in the stimulus bill for the average American?
An income tax credit of $400 for individuals and $800 for married couples for the tax years 2009 and 2010. The credit begins to phase out if your adjusted gross income (AGI) is over $75,000 for individuals and $150,000 for married couples. You are still eligible for the credit even if you do not owe federal income taxes (you still get the money).
Retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit within 3 months after the bill is signed by the President.
First time home buyers will receive a tax credit equal to 10% of a home purchase up to $8,000 if they purchased a home between January 1, 2009 and December 1, 2009. A similar tax credit was passed last year but had to be paid back over 15 years, this one you don't have to pay back. This credit starts to phase out if your AGI is over $75,000 for individuals and $150,000 for married couples.
For the rest of this year if you purchase a car you can deduct all state taxes, local taxes and excise taxes of a new car, light truck, RV or motorcycle. This credit doesn't apply to used cars. Unlike the AGI for the tax credit and a first time home buyer this credit starts to phase out if your AGI is over $125,000 for individuals and $250,00 for married couples. The law should have been written to include used cars and interest payments on auto loans.
For 2009 you don't have to pay federal taxes for the first $2,400 in unemployment benefits you receive, normally the first $2,400 is taxed.
If you have been or are laid off between September 1st, 2008 and December 31st, 2009 the federal government will pick up 65% of the cost of Cobra health insurance for up to nine months. To receive this benefit your AGI must be lower then $125,00o for individuals and $250,000 for married couples.
Educational benefits include increasing the Pell Grant to $5,350 in 2009 and $5,500 in 2010. A higher education tax credit in the amount of $2,500 of the cost of college tuition and other related expenses. The AGI for this tax credit is $80,000 for individuals and $160,000. For the tax year 2009 and 2010 money withdrawn from a 529 plan can be used for computers, software and Internet service for students living at home.
Saving us from the alternative minimum tax (AMT), well at least some of us.
An increase in the amount of pretax money that can be set aside for public transportation if you commute to work. In 2009 and 2010 the amount has been increased from $120 to $23o.
Hopefully this stimulus package, the other programs the Federal Reserve and Treasury announced will get the country out of this recession.