[Updated] : Is a 2012 jobs and stimulus package on the cards? As discussed in this article, President Obama has indicated that his new economic recovery plan will be released soon; which will aim to provide benefits for a number of groups struggling under tough economic conditions.
No New Taxes with Tax Extensions Approved. President Obama has now signed into law a bill that covers a temporary extension of all the bush-era tax cuts. The new bill also contains extensions to some of the 2008 stimulus tax breaks, and even has some new tax cuts. You can see more on these extensions here. With this legislation he has essentially created a new 2011 Economic Stimulus package, estimated at around $858 billion.
Further, there will be no $250 SSI payment in 2010. See this article for the latest developments on this payment into 2011.
[Updated for 2010-2011 payments] All the tax credits/deductions and payments provided in the massive 2009 economic stimulus package will no doubt be hard to top in the years ahead. However the good news is that there will be more credits and deductions available to most Americans in 2010, 2011 and beyond. These will continue to be funded from the $700 billion stimulus package, with additional funds coming from President Obama’s ten year annual budget. From previous posts on the stimulus tax credits and the over 400 comments, folks are clearly divided on the payment of these credits with many complaining that these payments and tax breaks are just more wasteful government spending with little real impact. However, for many Americans, young and old, these payments are a big and much needed boon in tough economic times.
Whatever your stance as it relates to the stimulus payments, many of these tax credits and deductions have been passed by Congress and signed into law by the president. So if you qualify, saying no to what amounts to free money is just bad personal finance. Therefore plan ahead and make sure you take advantage of these credits.
Recently Updated Articles and New Stimulus Payments
The Making work pay tax credit provides $400 for individuals and $800 for couples, phasing out completely at $190,000 for couples filing jointly and $95,000 for single filers. Because the credit is refundable (people can get it even if they owe no tax), most low-income workers will also qualify for the full credit. If you’re eligible, your payroll administrator will make the withholding adjustment automatically and thereby increase your take-home pay. The average worker will see this tax credit in the form of a $10 and $20 pay rise per year based on your tax rate. You may prefer not to adjust your withholding amount and can get your stimulus in a lump sum payment as a tax refund when you file your 2009 and 2010 taxes.
Home Owner Credit Extended (now expired): While you could have claimed the $8,000 stimulus funded new home buyer credit this year, many Americans will be claiming it in their tax returns. Here are some of the updated provisions in the extended home buyer tax credit
- The deadline for qualifying home purchases has been moved from Nov. 30, 2009, to April 30, 2010 (and possibly moving to Sept 30 2010). Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. (see this post for details on a further extension into 2011 of the home buyer credit)
- The maximum credit amount remains at $8,000 for a first-time home buyer – that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. The new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time home buyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
- The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
Mass Transit Fringe Benefit in 2010: Employees may exclude from income $230 per month in commuter transit benefits in 2009 and 2010 (adjusted for inflation). These qualified transportation fringe benefits are excluded from an employee’s gross income for income tax purposes and from an employee’s wages for payroll tax purposes.
New Vehicle Tax Deduction in 2010: In addition to the working tax rebates and home owner tax credit, the stimulus bill provides tax breaks for new vehicle buyers by giving them a federal-income-tax deduction on local and state sales and excise taxes. It enables taxpayers to buy now and get cash back later on in their 2009 tax returns (filed in 2010). It is applicable to the sales and excise tax on any new vehicle up to $49,500 of the purchase price. The car, SUV’s, light trucks or motorcycles must be purchased after Feb 16, 2009 and before Jan. 1, 2010 to qualify of this tax deduction. This provision that can only be claimed when filing 2009 returns, but is unlikely to be extended into 2010 or later given the improving fortunes of US automakers.
Energy Credits in 2010 and 2011: Given the President’s strong focus on the environment and clean energy, it was not surprising to see additional tax credits for home energy efficiency improvements. The Stimulus package provided for a uniform credit of 30 percent on the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The credit can be claimed via your tax returns in 2010 and 2011 for improvements placed in service during 2009 and 2010.
Education Credits claimable in 2010 and 2011 - The new American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. The full credit is available to individuals, whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. Many of those eligible will qualify for the maximum annual credit of $2,500 per student, so make sure you look into it, to help with rising college costs. There are also provisions in the 2010 budget to increase the maximum Pell Grant for college students, from low income households, in the next school year to $5,550.
2009 and 2010 Social Security Payment. President Obama has proposed another $250 one time stimulus payment to social security recipients in 2010 as detailed in this article “An Extra $250 Social Security Stimulus Payment in 2010 for Retirees, Veterans and the Disabled“. If you have not received your 2009 payment, make sure you visit the SSA website and follow up via the provided phone numbers. There is still no word on the final status for the 2010 payment. However, this has been offset for a a number of seniors with the $250 Medicare Drug Coverage Gap (doughnut hole) Rebate approved Under Obama Health Care Reform
The bulk of tax provisions in the stimulus package affect tax year 2009 – individual tax returns due April 15, 2010 – and tax year 2010 – individual tax returns due April 15, 2011. So it is important to plan your 2009 spend to ensure you qualify for the credits and deductions.
Health Care Reform Credits and Payments - The now approved $940 billion health-care reform bill which extends health insurance coverage to 32 million uninsured Americans, also has lots of credits and tax breaks over the next few years. This includes a $250 payment to seniors on Medicare. The $250 payment to offset the Medicare drug coverage gap - known as “doughnut hole” – a big, expensive gap in coverage that affects millions is among the first to be addressed under the new health care law will be in effect in Autumn of 2010. In 2011, Medicare eligible participants would also receive a 50% discount on brand name (non-generic) drugs.