Stimulus Bill Passed: How will it effect you?

Here are a few of the high level details form the recently passed Economic Stimulus Bill:

-Each eligible worker would get a credit of 6.2% of earned income up to a maximum credit of $400 ($800 for a two earner couple). This essentially equates to $12-$20 extra per paycheck. This is available to anyone who earns less than $95K per year and $190K for couples.

-First time homebuyers or homebuyers that haven’t bought a home in the past three years would receive an $8,000 tax credit for a principal residence purchased through November 30th 2009. This credit phases out for individuals with adjusted gross incomes between $75K to $95K and $150K to $170K for joint filers. This credit has to be repaid if you sell your home within 36 months.

-The credit within the federal alternative minimum tax (AMT) calculation is slightly increased for the 2009 tax year, which will reduce the amount of taxpayers subject to the AMT (Due to the tax structure in Maine, Mainer’s tend to be more susceptible to this tax).

-The first $2,400 of unemployment tax benefits will not be subject to federal income taxes.

-Taxpayers will be allowed to take an above the line deduction from income tax the state and local sales tax paid on a new car. The purchase limit is $49.5K and is applicable through the end of the year. (Although not usually applicable for Mainers, people who claim the itemized sales tax deduction already would not be eligible to claim this). This deduction phases out for individuals with adjusted gross incomes in between $125K to $135K and $250K to $260K for those married filing jointly.

-For workers laid off between 9/1/2008 and 12/31/2009, the cost of maintaining extended coverage through their former employer will be reduced by 65% for nine months. This benefit is available for participants that have income that exceeds $125K and $250K for those who are married and file jointly. Those who meet the eligible time frame but initially rejected coverage will get a second chance to re-apply for benefits.

-The Hope Credit available for college costs will be replaced by the American Opportunity Tax Credit which is a partially refundable credit of up to $2,500 that covers fours year’s worth of college. This is available through 2010 and then the Hope Credit would reinstate after that. In addition, Pell Grants aid awards increase by $500.

-Qualified 529 distributions now allow the cost of a computer as a qualified expense where this was not allowed unless the college required students to have a computer.

-Social Security recipients who don’t qualify for tax credits because they don’t work would get one time $250 payments.

-Energy efficient home improvement credit provisions are extended through 2010.

-Increased earned income tax credit for families with three or more children and additional marriage penalty relief

This only goes into the personal finance issues, but there are also provisions within the legislation that could possibly benefit business owners as well. As always, consult your tax advisor to get additional details on each. With the tax season in full swing, this is a good opportunity to discuss these provisions on how they may be able to help you!