Stimulus has individual aid
Published 1:19 am Thursday, February 19, 2009
At first glance, the 1,000-plus page “American Recovery and Reinvestment Act of 2009” — more commonly known as the “stimulus package” — may seem intimidating. It may also seem that the bulk of the government’s help is going toward large corporations and institutions.
However, there are opportunities for individuals to take advantage of some of the provisions of the stimulus package. Most of these advantages come in the form of tax credits and deductions. A tax credit is a reduction in the amount of taxes an individual owes, while a deduction is only a reduction in the amount of that individual’s taxable income. Tax credits are consistent among all tax brackets, while the net effect from a tax deduction depends on an individual’s income level and tax bracket.
Millions of workers — including most of those who earn less than $75,000 (or $150,000 for a couple filing jointly) — can expect to see an average of $13 more each week in their paychecks, staring in June, thanks to a $400 “Making Work Pay” tax credit that will be distributed through the rest of 2009.
Citizens who purchase a new car through Dec. 31, 2009, may choose to deduct their state and local sales and excise taxes, up to tax liability on the first $49,500 of the vehicle’s purchase price. This is a deduction that will be available even to those who do not itemize.
“There are already a lot of great incentives out there for buyers that the automobile makers have already put in place,” said Randy Harrelson, sales manager at Andalusia Ford. “This incentive will surely help and be well appreciated.”
In addition, first-time homebuyers who purchase their new home before Dec. 31, 2009, will be eligible for an $8,000 tax credit. For the vast majority of homebuyers, this amounts to an interest-free loan for the first year of a mortgage.
There is a 30 percent tax credit of up to $1,500 for purchasing energy efficient windows, doors, furnaces and air conditioning. That means if you spend up to $5,000 replacing windows and doors, or HVAC systems, you will actually only spend $3,500 because of that tax credit. Another example would be to replace a front door for $300, but only spend $210 thanks to the 30 percent tax credit.
The stimulus bill also includes about $300 million in consumer rebates off the purchase of new, more efficient Energy Star appliances. The Association of Home Appliance Manufacturers estimates that if every U.S. household replaced its current appliances with Energy Star appliances, more than $10 billion in utility costs could be saved each year.
“You can save money by using these appliances because they’re designed to lower your energy use,” said Jacob Jones, co-owner of Sears in Andalusia. “All of our appliances have tags that estimate what the energy use will be and also the estimated amount of money you could save.
“For example, our high-end washing machine-dryer combination with Energy Star saves you about 73 percent on your water and 77 percent on your energy. The next level down you’re probably looking at 63/66, and so on. You might spend more initially, but over the long run you’ll usually save.”
The stimulus bill will also help individuals who want to go to college.
The maximum Pell Grant, which helps the lowest-income students attend college, would increase from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. That would cover three-quarters of the average cost of a four-year college. An extra 800,000 students, or about seven million, would now get Pell funding.
The stimulus also increases the tuition tax credit to $2,500 and makes it 40 percent refundable, so families who do not earn enough to pay income tax could still get up to $1,000 in extra tuition help. Also, computer expenses will now be an allowable expense for 529 college savings plans.
More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package. Millions more could be kept from slipping into poverty by the economic lifeline.
People who get food stamps — 30 million and growing — will get more. People drawing unemployment checks — nearly five million and growing — would get an extra $25, and keep those checks coming longer. People who get Supplemental Security Income — seven million poor Americans who are elderly, blind or disabled — would get one-time extra payments of $250.
Many low-income Americans also are likely to benefit from a trifecta of tax credits: expansions to the existing Child Tax Credit and Earned Income Tax Credit, and a new refundable tax credit for workers. Taken together, the three credits are expected to keep more than two million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
The package also includes a $3 billion emergency fund to provide temporary assistance to needy families. In addition, cash-strapped states will get an infusion of $87 billion for Medicaid, the government health program for poor people, and that should help them avoid cutting off benefits to the needy.