President Obama will sign the $787 billion stimulus package into law this week, with approximately 35% going towards tax cuts and the rest going towards stimulus spending. Just about everyone stands to benefit from the stimulus in some fashion in the short-term, but a few demographics have an opportunity to reap more gains than others. Here is a list of seven groups of Americans who stand to gain the most from the soon to be enacted stimulus package.
1. Wage Earners & the Self-Employed
Wage earners and the self-employed are eligible for up to $400 a year for single taxpayers and up to $800 for couples filing jointly in both 2009 and 2010. If you are single, the credit starts to phase out at an adjusted gross income of $75,000. If you are part of a couple filing jointly, your phaseout would begin at $150,000 of adjusted gross income. You’re probably wondering when the check will arrive. It won’t. The IRS will begin reducing withholding taxes automatically at the clip of about $30-$40 a month. If you are self-employed, you can claim your credit when you file your return for 2009.
2. First-Time Homebuyers
Thinking of buying your first house? Although the oft-mentioned $15,000 credit for all home purchases was dropped from the final stimulus package, first-time home buyers can still claim a tax credit of up to $8,000 if the home is purchased between January 1st and December 1st of this year. If you purchase between these dates, you won’t have to repay the credit, as those who purchased in 2008 are required to. This is only for primary residences and the house cannot be sold within 3 years in order to keep the credit. Huge bummer for aspiring house flippers.
3. Home-Owners Looking to Improve Home Energy-Efficiency
If you’ve been thinking of adding new windows, an outer door, insulation, or other energy-efficient improvements around the house, this might be a smart year to do so. The max energy-efficiency credit has been raised from $500 to $1,500, and from 10% of the project’s cost to 30%. Additional purchases include energy efficient appliances such as air conditioners and water heaters. Before making a purchase, make sure the product is eligible for the credit.
4. Vehicle Buyers
If you purchase a new car, light truck, SUV, motorcycle, or RV after the package has been signed, you are able to deduct state and local sales or excise tax on the first $49,500 of the vehicle’s cost. This deduction starts to phase out for single taxpayers with adjusted gross incomes over $125,000 and couples over $250,000. You get the deduction whether or not you itemize on your return. If you’re in the market for a plug-in hybrid, you could benefit from a credit of at least $2,500 on up to $7,500.
The American Opportunity (formerly known as HOPE) credit for college expenses will increase from $1,800 to $2,500 in both 2009 and 2010. The credit covers 100% of the first $2,000 of tuition and related expenses per year and 25% of the next $2,000. This credit has also been extended from two to four years of college and can now count against book purchases. Credits are phased out for singles earning over $80,000, and married couples earning $160,000.
6. The Unemployed
Have you been laid off recently? Take some solace in knowing that the first $2,400 in unemployment benefits received can now be excluded from income. Additionally, you may also be eligible for a 65% subsidy for up to 9 months if you stay on your former employers health insurance policy. You will also start to receive a $25 weekly increase in your benefit check.
If you’ve been worried that your 26 weeks of unemployment benefits were almost up, you may now benefit from up to an additional 33 weeks through the end of the year. Check with your local unemployment office for further clarification.
7. Middle Classers Scheduled to Get an AMT Tax Hit
Middle classers can expect a $500 increase in the AMT exemption for individuals, to $46,700, and a $1,000 increase for couples, up to $70,950. This temporary fix is thought to free 26 million families from the AMT in 2009.
The stimulus package has not done much to solve the foreclosure and negative equity problems that the country is facing, and the market has reacted with uncertainty as a result. Many homeowners were hoping an across-the-board interest rate decrease would be worked into the stimulus package and were disappointed to get no relief in this area. The next step for the Obama administration should be to create a plan to help stem foreclosures before they’ve already happened. Meanwhile, how much do you stand to gain from the stimulus package?
For more of GE Miller’s writing, visit 20somethingfinance.com