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!

New Legislation You Need to Know About

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You’ve heard of the “Cash for Clunkers” government program that recently ran out of the original $1 billion. The Senate just approved an additional $2 billion for the program last night to extend the popular program and President Obama is expected to sign it into law as early as today. But just because it’s popular doesn’t mean you should take advantage of it.

Here are the details of the program. You can trade-in a gas-guzzling “clunker” that is less than 25 years old and gets 18 MPG (miles per gallon) or less. Check fueleconomy.gov for official MPG numbers. You must buy a new car in conjunction with the trade-in. The car must have be registered and insured for a full year before the trade-in. The program runs through November 1, 2009 or until these additional funds run out. Check out the cars.gov for full details.

If you were looking to buy a new car already (before you even knew about the $4,500 rebate), you can get a pretty good deal for a trade-in if your car qualifies. I would check out Kelly Blue Book or Edmunds to figure out a rough private party value for your car. If it’s worth way less than the $4,500 rebate and you have the money to pay for another car, I would take advantage of it. If you don’t have the money or have to take out a loan, why get into debt, especially if your clunker works just fine? It just seems like a waste to me, especially when the working clunkers have to be scrapped.

Another piece of legislation that you might not have heard about is the extension of the $250,000 FDIC insurance through 2013 that was passed back in May. The limits are expected to go back to the original $100,000 per depositor on January 1, 2014. In the meantime, you’re protected up to $250,000 on bank accounts, CDs, IRAs, and other accounts. You don’t have to worry about losing your money if a bank fails.

Photo credit: REUTERS/Jonathan Ernst

What do you think of the Cash for Clunkers program?

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Madoff Made Off With Billions – Now Sentenced to Jail

So the largest financial swindle in history ended Monday. The judge proclaimed, “Bernard L. Madoff shall be and hereby is sentenced to a term of imprisonment of 150 years.”

Bernie Madoff is the perpetrator of a $65 billion Ponzi scheme that spanned several decades and took thousands of victims. The 150-year sentence is essentially a life sentence as the 71-year-old Madoff is very unlikely to outlive his sentence.

A Ponzi scheme is where someone claims to own a company or “know” someone that has access to investments that have very good returns and are “guaranteed.” This person actually doesn’t invest the money from “clients” (victims), but uses new investors’ money to pay returns to older investors. This is how he gains trust from the investors by paying regular dividends. This makes it seem legitimate. But obviously it’s a scam from the beginning.

Madoff is believed to have started his elaborate scam in the 1980s, but his luck and his money ran out last December when too many investors wanted to cash out.

Some notable Madoff victims include actor Kevin Bacon, Dreamworks CEO Jeffrey Katzenberg, Director Steven Spielberg’s charity, former New York Governor Eliot Spitzer, and actor John Malkovich.

How much money would you have invested with Bernie Madoff?

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GM Should Have Gone Bankrupt 6 Months Ago

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As you may or may not have heard, GM recently declared bankruptcy this past Monday to become the fourth largest bankruptcy in U.S. business history. The General obviously had way too much debt on the books. Over $172 billion worth!

But what’s the problem? Well, GM should have gone bankrupt much sooner than Monday. It should have gone bankrupt six months ago. But it was unpatriotic to let GM fail. It was un-American to let GM go bankrupt. Too many jobs would be lost. It would send a catastrophic wave throughout the auto industry. But yet it happened. GM went bankrupt.

So why delay the inevitable and spend $20 billion in taxpayer money (and counting) in the process? We might as well call it “Government Motors”. Even after billions in government bailout funds, GM went under. 21,000 jobs will still be lost. Dealers reduced by 2,600. Plants still shut down. What did we get for $20 billion but a poorly-run company which should have failed months ago?

Saturn was sold off to Penske Automotive Group on Friday and Hummer is reportedly being sold to China’s Sichuan Tengzhong Heavy Industrial Machinery Company.

Why do I have a feeling that this country is moving towards socialism? Failure needs to be allowed. Without failure, there’s no motivation for success. Without failure, how can we learn from our mistakes?

So what can we learn from the GM bankruptcy? Get out of debt!!! Debt will make you bankrupt. And vote for someone who actually has your best interests in mind. America doesn’t need socialism. It needs a return to the foundations that this country was based on: a faith and trust in God and a free market. Let freedom ring.

Which of the big three U.S. automakers is your favorite?

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New Credit Card Laws Protect Consumers

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President Obama signed into law today credit card reform that was long overdue (no pun intended). The legislation had bipartisan support in the House and Senate and President Obama has been pushing it for a while. The legislation passed despite opposition from the credit card industry and I’m glad it did.

These credit card companies are taking advantage of consumers and just plain not treating them right. But if people didn’t get into credit card debt in the first place, so many Americans wouldn’t need this legislation.

Now the legislation doesn’t take effect until February 2010 which is not soon enough in my opinion.

Here’s how it protects you:

  • It makes it harder for anyone under 21 to get credit cards.
  • It bans rate increases until you’re more than 60 days late and restores the original rate after 6 months of minimum payments.
  • It forces credit card companies to post credit rules on the Internet.
  • It mandates a 45 day advance written notice of any interest rate hikes.
  • It forces them to apply payments to the highest interest rate first.
  • It bans universal default, where credit card companies can increase rates if you’re late on payments to any lender.

Well, here’s how you can protect yourself between now and February 2010 when all this takes effect. Get out of debt! You can’t pay any penalties if you don’t have any credit card debt. You don’t have to wait for the government to help you. Help yourself! God bless.

P.S. Did I just notice that President Obama is left-handed? I wonder how many left-handed presidents we’ve had.