As most of you know, President Obama signed the American Recovery and Reinvestement Act into law on Tuesday. Supposedly, millions of Americans will benefit from the plan in more ways than one. Here are a few highlights from the plan and how they will affect your taxes now and in the future.
Making Work Pay Credit
The making work pay credit will be heading to a paycheck near you in the coming months. The employed will get up to $400 per individual and $800 per married couple. Sounds like quite a good amount. However, you will not see all of this money at once as it will be used to reduce your weekly federal taxes on your paycheck. Every little bit helps in these economic times.
What about retirees, veterans, or people on disability? These individuals on Social Security will get a one-time $250 check in 2009. That should help give a small boost to those individuals on a strict fixed income.
What if you are unemployed? The bill has added several things to help those who are unemployed. It has exempted the first $2,400 in unemployement benefits from federal taxation. The bill has also increased the payout by $25 a week, extended the time period for benefits, and it gave a 65% break on COBRA premiums. I just hope this helps incourage individuals to seek work and not just keep them on unemployement longer.
Help For Individuals With Low Incomes
The bill also provides a larger Earned Income Credit (which is refundable) for families with 3 or more children. For those of you that fit into this category it will not affect you until you file your 2009 taxes. However, you may be able to get EIC advance payments by talking to your HR representative at work.
There was also a part of the bill that lowered the threshold for the child tax credit. This will help lower income families due to the lowering of the threshold from $8,500 to $3,000 for the current tax year.
Making Home Ownership More Affordable
The bill included the long awaited (and widely talked about) 1st time homebuyer credit. The original $7,500 credit needed to be paid back over several years. The new credit is refundable (meaning you can get the money even if you have no tax due) and does not need to be paid back. The nice thing about this credit is that you can take it on your 2008 tax return. If you have already filed your return, you may want to consider an amendment.
What are your thoughts on some of these measures? Will they work or will they come back and bite us later down the road?