The almost $790 billion American Recovery and Reinvestment Act signed into law will provide some benefits to almost 95 percent of workers, but most provisions won\'t happen automatically.
The Recovery Act gives taxpayers money to spend, incentives to spend it, and choices to spend it on. There are provisions that pay you now and some that pay you later. But for most us, this isn\'t a check-is-in-the-mail plan. All of us will need to be informed and take action in order to benefit from the Stimulus bill. Taxpayers will need to have guidance to maximize the benefit.
The Saunders Learning Group recommends taxpayers take note of five areas where you may benefit:
- More money in your pockets now
- Help for those who are disadvantaged
- Homeownership becomes more affordable
- Increased access to higher education
- Getting green from the garage
Nearly everyone wants to know what the Recovery Act will do for you in terms of direct income, credits and deductions that you can benefit from. Saunders Learning Group recommends consulting with a tax professional to help break down the changes and what they may mean to each individual.
Put money in your pocket now
The bill includes provisions that immediately puts money into wallets of all sorts of people including employees workers, the unemployed, and retirees. For both 2009 and 2010, the Making Work Pay tax cut means up to $400 for individuals and $800 for couples through a reduction in income tax withholding; in other words, bigger paychecks. While week to week this is not a big change, it does help stretch your dollars. Eligible workers may need to work with their employers to ensure any adjusted income tax withholding is appropriate for their situation.
For example, if you transferred to the new reduced withholding amounts, you may actually owe more taxes when you file your 2009 and 2010 returns. You will most likely want to sit down with a tax professional to work out how your tax situation is affected by these changes. Most accountants, CPAs, or tax professional will provide a free assessment as part of their annual services, or any fee should be modest, so take advantage of the new provisions by reviewing your situation with your tax preparer or accountant.
For eligible self-employed taxpayers, you can adjust your quarterly estimated payments. For taxpayers who do not receive the full amount this year, you will receive the remaining as a credit on next year\'s tax return. Social Security and SSI recipients, retired and disabled veterans, and railroad retirees will get a one-time payment of $250. The Social Security Administration and Veterans Administration will provide the information about who qualifies for this payment; eligible individuals won\'t have to do anything. Individuals on a federal or state retirement program who don\'t receive Social Security benefits can claim a $250 credit when you file your 2009 tax returns.
If you qualify for both the Making Work Pay Credit and the $250 payment, you can\'t get the full amount of both benefits. In these cases, the Making Work Pay Credit will be reduced by $250. For all the federal retirees who are used to double dipping that is not going to occur with this bill.
If You are Unemployed
If you are unemployed you can receive many new benefits. Just remember, in most cases, these benefits are included in your taxable income. Many will receive a $25 weekly boost to your unemployment check. In addition, the first $2,400 in benefits are exempt from federal tax in 2009. Eligible unemployed workers paying for COBRA will benefit from a 65 percent federal subsidy for your monthly insurance premiums.
Helping more of those who have less
This act also expands the Child Tax Credit, allowing families to start qualifying for a credit with every dollar earned over $3,000. For taxpayers, this change translates into a refundable credit of up to $1,000 for each qualifying child under 17. Refundable credits give taxpayers a real boost because if the person has no tax liability, the credit is issued in the form of a refund.
If you qualify for the Earned Income Credit (EIC), you will see increased benefits here too. The Credit for families now covers three or more children. Previously, EIC benefits were capped at two children.
Making homeownership more affordable
The Stimulus act also provides a new $8,000 tax credit for first time homebuyers. If you live in the house for at least three years, you will not have to repay the credit, should you move after that time period. To qualify, you must purchase a home between January 1, 2009, through November 30, 2009. Taxpayers who have purchase a home in 2009 can actually take advantage of this credit on their 2008 return. For those who have already filed, filing an amendment is the best way to capture this full credit on their 2008 tax return. Consult your tax advisor or accountant. The Stimulus plan also includes tax credits for energy-efficient improvements such as replacing qualified new furnaces, windows, and doors to existing homes. The credit applies to 2009 and 2010 tax returns, with a lifetime cap of $1,500.
Increasing access to higher education
More Americans will qualify for the American Opportunity Tax Credit, to get a new, partly refundable $2,500 tax credit for college tuition in 2009 and 2010. By making the credit partially refundable, nearly 4 million low-income students now can qualify for the credit. This is a better alternative for taxpayers than the two existing higher education credits.
A new provision expands which expenses can be included in the popular 529 college savings plans. If you are starting to spend for college under this plan, you can now include computer and computer technology costs as qualified expenses in 2009 and 2010. Previously, eligible expenses included only tuition, room and board, and books, supplies and equipment that were required for attendance at the school.
Go Green
The package allows taxpayers to deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, recreational vehicles and motorcycles. The vehicles must be purchased between the enactment date of the Act through the end of this year.
The Act also provides a tax credit of up to $7,500 for families who purchase plug-in hybrid vehicles purchased after 2009 or plug-in conversion after date of enactment and before 2012. Even if you don\'t itemize your tax return, you will be able to benefit from this. You will find a tax credit line for this on your 1040 tax form. Again it is always best to consult a tax preparer, accountant or CPA.
While this act also provides for several other spending provisions, the individual tax savings available will benefit almost all US taxpayers, making it more important than ever to review your tax situation and take advantage of the benefits of the Stimulus recovery provisions.
Article Source: http://www.articlesbase.com/taxes-articles/2009-stimulus-bill-has-some-tax-savings-for-nearly-everyone-781676.html
About the Author:
Floyd D. Saunders has 35 years of experience in the financial services industry. Floyd’s diverse background includes experience in retail banking, investment banking, insurance, investments, financial planning, and tax preparation. He has been an adjunct faculty member for St. Mary’s College, Moraga, California, and Community Colleges in California, teaching courses in managerial finance, money and banking, and principles of banking. He has also taught extensively for the American Institute of Banking and various banks.
Mr. Saunders’ professional experience includes assignments in the business lines of retail banking operations, investment banking, institutional trust and securities services, employee and management training, and systems engineering for banking, accounting, and tax preparation firms. He has worked for Bank of America, JP Morgan and JPMorgan Chase, and as a consultant in the financial services industry. He has prior experience as a registered representative and has published several articles on personal financial planning.
Mr. Saunders has authored four programs for the American Bankers Association, Banking on Mutual Funds and Annuities, Mutual Funds and Annuities, Introduction to Securities Markets and Investing in Securities.
Mr. Saunders earned a Master of Arts degree in Management from Central Michigan University and a Bachelor of Arts degree from San Diego State University.