A jumbo-jet-sized $787 billion stimulus package was signed into law on Tuesday in the US by President Obama. Since it's tax season here are some of the tax-related implications of the stimulus package:
- A tax credit of $400 per worker or $800 per couple, coming over the next two years, either through decreased withholding or through checks.
- A reprieve on the Alternative Minimum Tax “snare.”
- A $2,500 tax credit for college tuition over the next two years, which is phased out for high-income households.
- An increased child tax credit for low-income families.
- An expanded Earned Income Tax Credit for larger, low-income families.
- A modification to current law that changes an $8,000 loan for first-time home-buyers to a credit.
- A new deduction for sales tax paid on new cars, light trucks, recreational vehicles and motorcycles through the end of the year.
- Decade-long tax incentives for various renewable-energy expenses and expenses aimed at increasing energy efficiency.
- An accelerated depreciation schedule for certain business equipment purchased this year (this allows the equipment to be written off faster than normal, giving more tax savings this year).
- A tax increase for banks involved in bank mergers.
I won't comment on all of these but I will on a few:
- The $8,000 credit is good for first-time buyers. Prices are better than they have been over the past few years. I'd still look for a great deal from a distressed seller — there are plenty of those — and make the credit the icing on the cake. Please be wary of using the tax credit as an excuse to over-extend yourself with a house.
- Making new vehicle sales tax deductible sounds like a way to reduce some of the excess inventory at the big three. 😉 If the sales tax is 5% and you're in the 20% tax bracket, this is only a 1% savings on the vehicle — at most a few hundred dollars. A recent-model used car will save you far more at the outset and may do just as well for you as a new car. Buying used when it makes sense is the best money-saving tip I can give.
- The tax increase for the banks is estimated to be $7 billion over 10 years. That's $700 million per year, for all banks involved in mergers. This doesn't seem like it would hurt that much?
Anyway, put your stimulus money to good use when it comes!
I think that sales taxes paid should always be tax deductions, but I guess that's the closet republican in me.
I bought a car last year, so I'll miss those few hundreds bucks I could have.
That tax increase on the banks was the closing of a loophole from Paulson's bailout bill. Good on them for catching that.
i meant to write "but wonder"
I can’t help buy wonder if the home buyer tax credit will have the same effect as unnaturally low mortgage rates in the early 2000’s. Are we setting ourselves up for another real estate crash?
I was planning on buying a home in Summer of 2010, but I might have to move that up 6 months to get the $8,000 credit 🙂
I wish the first time home buyer credit went back to January 1, 2008, not April 1.
I’d be interested to hear their reasoning behind choosing that date.
Granted I would have to pay it back, but still…an interest free loan would be great.
Just to put some perspective on the stimulus package… imaging when Jesus was born, and you spent $1 million that day. And then imagine spending another million dollars every day after that until today. Guess what? You still didn’t spend as much as the stimulus bill. (I checked the math… its true)
These numbers are mind boggling, just trying to survive out here in realiy land, ya know?