New 2010 Stimulus Package Tax Breaks – Focused on Economic Aid For Middle Class Families via Increased Child Care, Student and Aged Care Credits

[Updated following SOU speech] President Barack Obama has proposed a new round of stimulus spending in 2010, focused on middle class families struggling to pay bills and care for their families. The initiatives in the new stimulus package are a product of a middle class task force headed by Vice President Joe Biden, and will also be included in Obama’s budget request due to be submitted to Congress next week. Biden defined middle class as a family of four with an annual income of about $85,000. The initiatives proposed include:

– A doubling of the child care tax credit for families earning under $85,000. This is equivalent to increasing the current deduction limit from 20% to 35%. Families making under $115,000 would also see at least some increase in their tax credit as well. Families could claim up to $3,000 in expenses for one child or $6,000 for two children. The maximum credit for a family with two children making $80,000 a year would increase by $900 from $1,200 to $2,100

This will help two-thirds of families with children that are headed by two working parents or a single working parent. Child care costs have grown twice as fast as the median income of families with children since 2000. Full-time care for an infant often costs more than $10,000 annually, and monthly child care fees for two children at any age are higher than the median cost of rent. Meanwhile, the Child and Dependent Care Tax Credit has only increased once in 28 years and is not indexed

– A $1.6 billion increase in federal funding for child care programs to help working parents pay for child care in fiscal 2011, which begins Oct. 1, to benefit an additional 235,000 children.

• Capping student’s federal loan payments at 10% of income above a basic living allowance, to make payments more affordable. Over the past three decades, college tuition has grown ten times faster than real median incomes for families with children. About two-thirds of graduates took out loans to pay for college and their average student debt is over $23,000. Debt is particularly burdensome for workers in low-paying public service careers, as well as those who lose their jobs or who did not complete their degree. The president also proposed forgiving all remaining debt after 10 years of payment for those in public service work – and 20 years for all others.credits. Currently, 78 million working Americans—roughly half the workforce—lack employer-based retirement plans. Fewer than 60 percent of working heads of families were eligible to participate in any type of job-related pension or retirement plan in 200

The additional flexibility in repaying student loans will complement the Administration’s ambitious agenda to make higher education more affordable, including increasing Pell grants, reforming the student loan program, makjng permanent the new $2,500 American Opportunity Tax Credit for college costs, expanding low-cost Perkins loans, strengthening community colleges and increasing graduation rates at both two- and four-year institutions.

• Allocation of $100 million to assist families caring for aging relatives by providing help with transportation, adult day care and in-home aids. An estimated 38 million Americans provide unpaid care to an aging relative, including approximately 23 million caregivers with jobs and 12 million who are also caring for their own children.

• Expanding tax credits to match retirement savings. This proposal would also require many employers to provide the option of a workplace-based 401(k) retirement savings plan. Employers who don’t offer 401(k) retirement plans to offer direct-deposit IRAs for their employees (unless they opt out), with exemptions for the smallest firms. The cost to employers would be offset by new tax

The Administration proposes to help working families save for retirement by expanding and simplifying the Saver’s Credit to match 50 percent of the first $1,000 of contributions by families earning up to $65,000 and providing a partial credit to families earning up to $85,000. The Administration will also make this tax credit refundable to ensure that millions of additional middle-income families can take advantage of it even though they have no income tax liability

The president said that creating new jobs and reducing unemployment is the “single-most important thing we can do to rebuild the middle class. We also need to reverse the overall erosion in middle-class security, so that when this economy does come back, working Americans are free to pursue their dreams again.”

Source: Whitehouse.gov

The White House says the new proposals are aimed at just that – the “sandwich generation” that is now struggling to care for both children and parents. The theme fits into the planned economic message of Obama’s prime-time address to the nation on Wednesday, which promises to provide a sharper focus on jobs and is likely to cover financial regulations, energy, education, immigration and a push to change the political tone in Washington.

Related:
~ $800/$400 Making Working Pay Tax Credit
~ 2010 Extenstion of $8,000 New Home Buyer Credit
~ Seven Sure Fire Ways For Students to Rack Up Debt and Ruin Their Financial Future (How to Avoid This Outcome)
~ Key Dates for Stimulus Payments
~ New Car Stimulus Deduction
~ Economic Stimulus Package Details