We are all holding our breath. We all want to know. Will the 2009 economic stimulus bill reverse our wayward economy? Unfortunately, it will take months, or longer, to find out. In the meantime, we can ask what this giant government spending plan will do for us—young Americans—individually. What will the 2009 economic stimulus plan mean for you?
The stimulus plan will impact every twentysomething differently. Whether you benefit from various provisions of the plan will depend upon whether you are a student or a worker, your annual income, and whether you lose your job, buy a home, or go through other life events.
What the Economic Stimulus May Do For You
- $400 individual/$800 couples “making work pay” tax credit in 2009 and 2010
- Temporary suspension of federal taxation on unemployment benefits
- $8,000 first-time homebuyer tax credit
- Additional tax credit up to $2,500 for higher education expenses
- Vehicle purchase tax incentives
$400 or $800 “Making Work Pay” tax credit. Designed to temporarily alleviate working Americans’ tax burdens, the making work pay tax credit would reduce federal income taxes owed by up to $400 for individual filers making less than $100,000 and $800 for couples earning less than $200,000. The credit is slated to go into effect on July 1, 2009, after which workers will start seeing about $67 more in their monthly pay that’s not going to taxes.
Temporary suspension of taxes on unemployment benefits. Many workers laid off in 2008 may be in for a nasty surprise when they do their taxes this year: unemployment benefits are taxable, although most states do not withhold income taxes from benefit checks. The stimulus bill doesn’t help people who owe taxes on 2008 unemployment compensation, but it does suspend federal income tax on the first $2,400 of unemployment benefits earned in 2009. Unemployment recipients nationwide will also see an extra $25 weekly.
$8,000 first-time homebuyer tax credit. If you buy your first home between Dec. 31, 2008 and Dec. 1, 2009, you may be able to claim a tax credit of up to $8,000 for first-time homebuyers.
Additional tax credit up to $2,500 for higher education expenses. The “American opportunity tax credit” is basically an expansion of the Hope lifelong learning tax credit. The new perk provides 100% credit for the first $2,000 and 25% of the next $2,000 on qualified higher education expenses including tuition and textbooks. This credit is 40% “refundable”. That means that even if you are a full-time student and do not owe any income tax, you can earn a tax credit of up to $1,000 for these higher education expenses.
Vehicle purchase tax incentives. If you’re in the market for a new car, Uncle Sam is going to help by allowing you to deduct sales or excise taxes if you purchase the vehicle before the end of 2009. This deduction is above the line, meaning you can claim it even if you don’t itemize. The deduction is good for sales tax on purchases of up to $49,500 and phases out for individuals with incomes of more than $125,000 and couples with incomes of more than $250,000.
Don’t drive? There’s good news for public transit commuters, too. The bill increases the amount you can set aside in pretax dollars to cover public transportation to $230 from $120. To take advantage of this benefit, your employer must provide a mechanism for you to set aside tax-free transportation dollars and allow you to spend the dollars on qualified expenses like train, subway, or bus passes.
Do you see another way the 2009 economic stimulus bill will directly impact your life? Have a question about one of the bill’s benefits? Let me know!