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WTH is the Stimulus Going to Do for ME?!?

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Danielle Hoston: 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:

For everybody:

  • 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.
woman holding cash

For homeowners:

  • 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:

  • The Earned Income Tax Credit of approximately $1,000 will now include families with three or more children that pay no income taxes.

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:

  • One-year provision to avoid having to pay the Alternative Minimum Tax. On average, this will save upper middle-income families of four about $2,300.

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?



next: Just Say No to Longer School Years
10 comments so far | Post a comment now
hungrymama March 2, 2009, 4:00 PM

thanks for breaking it down and making sense of it all for us as moms. Now I get it!

ivar March 2, 2009, 9:00 PM

My concern isn’t whether the stimulus will work, or not. I’m really only looking at the fact that T bonds have been falling very sharply in price since the beginning of the new year. And regardless of anything else, I believe the massive deficit financing will lead to continued weakness in T bonds. Eventually too, I believe, the massive increase in the monetary base and excess bank reserves that is now being followed by big increases in cash in circulation, all engineered by the Fed, will cause weakness in the dollar, exacerbating any continued down trend in T bonds.

ivar March 2, 2009, 9:02 PM

Moms can make money in T bond trading too, btw.

Selene March 2, 2009, 10:28 PM

Thank you for breaking that down Danisha much appreciated.

D.J. March 3, 2009, 1:10 PM

There is one problem everyone has failed to note. Where is all this money coming from? Did Mr. Obama suddenly find the magic pot of gold at the end of the rainbow? No, we’re robbing our kid’s piggy banks. What the government gives to one person it MUST first take from someone else. That’s the way it works. Plus, stimulous packages have been tried all around the world and haven’t worked even once.

Ginny March 3, 2009, 4:01 PM

Common sense would say we should learn from the mistakes the Japanese made when facing the same critical financial issues in their country. These ‘packages’ do not work. Let’s see… giving more credit to people and businesses that shouldn’t have had it in the first place… giving checks to people to ‘stimulate’ more buying instead of paying down their debt.. on and on. Where are all these trillions of dollars coming from? And why do I have to help my neighbors pay off the mortgages on their homes when they couldn’t afford it when they bought it. Our family has worked hard for years to be financially responsible. We are debt free and have only four years left to pay on our mortgage. Now we get to suffer along with all the irresponsible people who are being allowed to keep what they shouldn’t have.

ivar March 3, 2009, 8:31 PM

D.J.

You missed my point. You are really saying the same as I. We shouldn’t take it for granted that we can keep borrowing at low rates for ever. All I can say is; it better work. Obama, no doubt, is going for broke.

downinit March 5, 2009, 12:51 PM

A lot of conservatives have never heard of economic theory other than supply-side economics (tax cuts). Supply-side economics only works when the economy is strong or in mild recession but not a severe recession such as we are encountering today.

Wikipedia:
The solution to a depression is to stimulate the economy (“inducement to invest”) through some combination of two approaches: a reduction in interest rates, and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

Christine March 5, 2009, 2:20 PM

Thanks for the info.

evelyn mario  June 7, 2009, 1:33 PM

i recived a text from mtn on d 7th of june saying dat i have won 1 million in mtn treasure hunt intructing me to claim me prize c48793


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