What Piece of the $787 Billion is Yours?

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You could read the entire stimulus bill (the American Recovery and Reinvestment Act of 2009) online at the Library of Congress that President Obama signed into law today. Or…you could just find out how it affects you right here on Christian Finance Blog!

First things first. You’ve probably heard that the new bill has a tax credit on your paycheck. It’s called the Make Work Pay credit and it’s worth 6.25% of any earned income in 2009. The max is $400 for singles making less than $75,000 and $800 for families with $150,000 or less combined income. It will be distributed through payroll for the last 26 weeks of the year. So it equates to about $15 a week for single filers who qualify for the $400. This will not come through your tax refund like the last stimulus. It also provides a one-time $250 payment for those who don’t work and retirees.

The next big tax credit in the new bill is the $8,000 New Homebuyer credit. This is different from the $7,500 new homebuyer “credit” that was supposed to be paid back over 15 years. The new $8,000 new homebuyer credit is a real tax credit, not an interest-free loan. It actually reduces your tax liability. Even if your tax bill is less than $8,000, you’ll get the difference back. If you overpaid your taxes throughout the year, you’ll get your regular refund plus the $8,000 extra! Sounds like a good deal to me!

So how do I qualify? You have to purchase a home between January 1, 2009 and November 30, 2009 and be a first-time homebuyer. To qualify to be a first-time homebuyer, you must not have owned a primary residence home within the last 3 years. It’s okay to have owned investment property or a vacation home as long as you didn’t live in it for most of the year. Also, you need to stay in the new home for 3 years to keep the tax credit. Income restrictions are the same as the Make Work Pay credit; $75,000 for singles and $150,000 for married filing jointly.

The next part of the bill that may affect you is the Car Buyer tax deduction. This is a tax deduction not a tax credit (which is more valuable). A tax deduction only reduces your income so it’s only worth the amount times your tax rate. The deduction allows you to deduct the state and local sales tax for any new car, truck, R.V., or motorcycle that was charged on the purchase during 2009. This won’t help you if your state doesn’t have a sales tax and it’s an above-the-line deduction so you don’t have to itemize to get the deduction. Income restrictions are $125,000 for single filers and $250,000 for joint filers.

Next up is the American Opportunity Tax Credit for 2009 and 2010. This tax credit increases the existing Hope Scholarship tax credit from $1,800 to $2,500. Income restrictions are $80,000 ($160,000 for married filing jointly). Partial credits are available to those making up to $90,000 ($180,000 filing jointly). Also related to this is the increase of the Pell Grant to $5,350 in 2009 and $5,550 in 2010.

For those of you who are unemployed, there’s also help for you in the bill. Cobra coverage (which allows the unemployed to keep health insurance from a previous employer) will be subsidized up to 65% of Cobra premiums for up to 9 months if you laid off between September 1, 2008 and December 31, 2009.

Unemployment benefits are also going to be increased by an additional 20 weeks (and 13 weeks more in certain states where unemployment is higher than 6%) and $25 additional weekly. Also, the first $2,400 is tax exempt in 2009 on your federal income taxes.

There are other portions of the stimulus bill like increased food stamp payments and deductions for energy efficient appliances and others. I may not agree with some of Obama’s policies but I’ll take free money any day! Bring it on Prez!

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