OT new stimulus package Xpost

by Brenda Schafer
The Tax Institute at H&R Block;
MSA, CPA, CFP, EA

Congress got their act together on Friday and passed (barely) the much-anticipated American Recovery and Reinvestment Act of 2009. President Obama will sign the bill into law on Tuesday, February 17 in Denver, Colorado.

There were some surprising changes from what we thought would happen. I’ve been told if I go into a long-winded summary, you guys won’t read it, so here are some highlights. Maybe it’s still too long for the blogger brain. You can skip the sections you’re not interested in, if that will help. . .

What you may want  to know
Making work pay credit. It’s 6.2% of earnings up to $400 per worker (not the much touted $500 per worker.) Self-employment income that is excluded from tax doesn’t count, but nontaxable combat pay does. That’s cool. And the credit applies for 2009 and 2010. Looks like you’ll have to get with your employer if you want the lower withholding. No word when that will start, though.

Stimulus payments to seniors and disabled vets. The payment that will be sent to Social Security and SSI recipients and disabled vets will be $250, rather than $300. Retired government workers who don’t receive Social Security will be able to claim a $250 credit when they file their 2009 tax returns.

Earned income credit (EIC). Families who qualify for the earned income credit who have three or more children will get a slightly larger credit for 2009 and 2010. The phaseout range for married taxpayers was also moved, which will mean larger a larger EIC for those families.

Additional child tax credit. In 2009 and 2010, more taxpayers whose tax liability is not large enough to fully claim the child tax credit as a nonrefundable credit will qualify for a credit because the eligibility for the refundable credit will start at earnings of $3,000 rather than the $12,050 that would have applied. For one child, the child tax credit is fully refundable when earned income equals at least $9,667.

American Opportunity Tax Credit (AOTC). We can get excited about this one. This new credit is equal to 100% of the first $2,000 of eligible expenses and 25% of the next $4,000 of eligible expenses. That means that if you pay at least $4,000 of qualifying expenses, your credit is $2,500. The better news is that it applies to the first four years of college, unlike the Hope current that applies to the first two years. For lower-income families, the best news is that 40% of the credit is refundable. Even if they don’t pay tax, they will be able to claim an AOTC of up to $1,000.

First-time homebuyer credit. For homes purchased in 2009, the credit no longer has to be repaid. (Don’t shoot the messenger, please.) The eligibility period was extended for six months to include homes purchased through 12/1/09. The maximum credit was also increased from $7,500 to $8,000. (Again, I’m only the messenger.) Good news: First-time homebuyers who purchased a home in 2009 but who already filed their 2008 returns claiming the $7,500 credit can amend to claim any additional credit for which they’re eligible. (Note: There’s no $15,000 credit for homebuyers. That one didn’t make the final cut.)

State and local sales tax deduction for new vehicle purchases. The final bill allows a deduction for state and local sales tax paid on qualifying automobiles, motorcycles, and motor homes. Whoo hoo. Even those who don’t itemize will be able to claim the deduction as an additional standard deduction. (You won’t be able to deduct the interest on the loan, though. Sorry!)

Side note: One of my colleagues suggested that the standard deduction should be renamed "itemized standard deduction," because for 2009 we’ll be able to add personal property taxes, federally declared disaster losses, and state and local sales on a new car to our standard deduction. Nifty noodles, eh? All they need to do is throw in an additional standard deduction for charitable contributions of non-itemizers. Don’t smirk. It could happen!

Alternative minimum tax. Rather than waiting until the very last minute to pass an AMT patch, Congress included one in this bill. Go, Congress!!! The patch doesn’t preclude Congress from considering later legislation that would repeal the AMT once and for all, though. ---Who among you would complain about that (as taxpayers, I mean, not as fiscally responsible stewards of the national debt)?

I only hope this thing will be the shot in the arm they think it might be. I must admit, I have my doubts. However - doing nothing is worse (IMHO)!

Whole damn thing will take years and years to pay for! The next several generations will be paying the bill on this ****! Just think if this is just the first month of this administration think how much further in debt this country will be after four years!  Think it was Kurschev, pardon the spelling, who in a speech told the U.N. back in the 50's or 60's that Communism would take over this country without firing a single shot!

I'am a senior and I think its great.  Lost 40% 401k, 25%of my tenants, and cant drum up any business.   $250 xtra in SS ck great.  This stimilus post response is worth 5 pages, but I havent got the time right now.
Just told my son, you'll be paying for our screw ups. so my wife and I booked a 12 day trip to Greek isles this summer.  Blow it all let the kids take care of us .  Socialism and kids will take care of us seniors -  So take your chunk   money and see the world b4 its TO LATE. gotta go
Cramer is hollowering

 Umm...weren't we already ove 8 trillion in debt before the package? Hey nobody ever made noise about until recently! The harm's already been done, what's a little more? 

I know, a lot of folks are "just not that into him!"

 Damn! My keyboard's not skipping only letters, now it's missing entire words! 

To NotDave:  I occasionally have that problem on the OH site and nowhere else.

 Sorry, it must have been 8 trillion in SPENDING, not DEFICIT. Bush did a trillion $ tax cut and there was a trillion dollars in spending on the Iraq war, but evidently the taxpayers had both of those covered. 

Oh well, it will probably work out in the long run. Other countries will do anything to get US consumer SPENDING AGAIN!

 It is really worrisome though, this unchartered territory. Everyone likes the goal of breaking from the lobbyists, but that has not been done before so everyone wonders if it's too "radical."  The spending is unprecendented but no one can say for sure whether it will work or not. But are there any alternatives?  I think the lender nations probably have even more at risk than the US.