2009 Economic Stimulus: What It Means For You

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!

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


  1. Although I would love to jump up and down and say thank God they passed this bill, from what I have read of it (about 800 pages worth), I see alot that does not do much to stimulate the economy any time soon, and a whole lot of one time federal injections that are like putting bandaids on a bullet hole. I agree that something had to be done, but I think this was like killing a fly with a wrecking ball. Yes we killed the fly, but what collateral damage have we done in the process. I think the key to any economic crisis would be to put more of the tax payer’s money in their hands (that does not mean give everyone a stimulus check). It just means let them keep more of what they earn and they will spend it. When you do alot of one time infusions, people get the Hurricane mentality of packing everything they can get their hands on into a hole and defending it like there was no tommorrow. In this economy, we need slow, steady and measurable things that people can see and touch, not huge plans that no one can fathom, including the authur’s of the plans themselves. I know most people followed the doom and gloom mantra of if we don’t do it now life is over. The economy is alot like nature. Survival of the fittest should have been in effect. If a business has gotten lazy and cannot maintain itself in the present economy, move up or move out of the way for those who can. When we prop up these failing business, we stiffle the new bred like us from filling the holes with our new ideas. This should be unacceptable to use but for some reason we continue and now it seems encourage it. Just my $13 a week worth of advice.

  2. I was planning on buying a late-model used Civic before the end of the year, but now am pondering buying a new Civic for the tax-credit. Does that make sense, or is late-model used still the smarter choice?

  3. Chiamo, probably not a real good idea the way I figure it. Per the Bill, you are only allowed to deduct the sales tax from a new car purchase. Given that you lose like 20 to 30% of the value of a new car as soon as you drive it off the lot I would think the number between the tax break and the beating you would get from the depreciation of the new car would never add up to any savings. If it were me, I would buy a 2 year old, low mileage car and not take the carrot on this one. Just my opinion though :-)

  4. Too bad I had to buy two cars in 2008!! It figures!

  5. Chiamo, one thought. Eddie’s definitely right that you typically lose 20-30% of the value of a new car as soon as you drive off the lot, although Hondas, especially Civics, may be something of an exception. I worked briefly as a Honda salesperson and was amazed to see that dealers sold two year old civics for only $1-$2k less than brand new ones. That said, you likely couldn’t get that in a private sale, but it does show Civics depreciate a bit less than other models.

    I would look at the credit as an opportunity to perhaps get a new car for not much more than you would’ve paid for the used one, although even with the credit you’re still paying a premium for buying new.

  6. Jennifer says:

    Ok, my friend just informed me he recieved a $600 Stimulus check a couple weeks ago for 2009. This sounds like good news to me being that were in the same business of hospitality and no children and around the same age…..I already did my tax return so I guess its just a waiting game. I did mine on turbotax and efiled he did his thru Jackson Hewitt and paid to have his return faster…do you think this would make a difference in time frame of recieveing your check?

  7. Jennifer, your friend probably received a $600 stimulus check because he did not recieve one the last go around. THERE IS NO STIMULUS CHECK FOR THIS YEAR! If you did not get it last time, you get it this time, that simple. I would not plan on that check coming anytime soon. Unless you did not get a check last year that is.

  8. I have a question for anyone. Although the 2009 Work Pay Tax Credit will provide a little more in my paycheck each week. How does this affect my tax liability when filing in 2010 (for 2009)? Will the liabilities change along with the lowered payroll tax withholding? Or will I simply have paid in less taxes, thus increasing my tax liability next year when I file?

  9. Drokkenian says:

    Exactly what I want to know Drenna. If I end up having to pay more in taxes back in 2010 (ie get less of a refund or god forbid having to pay) then I don’t want the “credit”. It won’t be worth it to me.

  10. FightForANewAmerica says:

    stimulus checks are a joke, its just another way for the goverment to hide themselfs for what they are really doing with the money we give them every week,its just a way of keeping you off there trail, to give you this money, and you guys think its free money but its not,its the money you pay every week from working , i really think the goverment could do alot better then what they are giving,instead of giving all this money to other countrys, i dont really understand the goverment myself and all this stuff i wrote is my assumptions, but something really has to be done, i really do not think that god attended us to act like this, i know he made goverments and the laws on the land, but you have to realize that the devil does things to, to blind people from seeing the truth, and if you want to see the truth then all you have to do is accept god as your lord and savier, belive in him and he will give all the answers you need.

  11. william w walters says:

    I was wondering when i would get check for 250 dollars.

  12. I was wondering when I am getting my Economic Stimulus check?