What the Stimulus Package Means to US

Economic Stimulus 2009

The American Recovery & Reinvestment Act (ARRA)

On Tuesday, Feb. 17, President Obama signed a $787 billion stimulus package, designed to kick-start the sagging economy and get millions of Americans back to work, and the country back on its feet.

So what is the 2009 stimulus plan and how might it affect me and my family?

Officially known as The American Recovery & Reinvestment Act (ARRA), the stimulus plan includes tax relief for middle-income families and spending programs for things like transportation, environmental and broadband infrastructure projects, aid for states and energy assistance, all designed to create millions of good-paying jobs.
The good news is that 95% of America's taxpayers will benefit from at least one of the tax breaks. Unlike the 2008 Economic Stimulus, there will not be stimulus rebate payment checks in 2009 for the majority of Americans. While some of the relief will be paid this year, the majority of the relief for an average taxpayer is most likely to come next year.

Note: Most provisions below are subject to phaseout for higher-income individuals. See the detailed FAQs for more information.

Key taxpayer provisions:

Tax credit for workers: for 2009 and 2010 there is a "making work pay" tax credit of up to $400 for working individuals and up to $800 for couples.

Temporary suspension of taxation on unemployment benefits: the jobless get a little more help with a $25 increase in weekly benefit checks through 2009 and suspension of federal tax on the first $2,400 of unemployment benefits received in 2009.

Retirees and disabled individuals: those receiving Social Security benefits and individuals on disability will receive a one-time payment of $250 in 2009.

First-time home buyer credit: increased to $8,000 for qualified first-time homebuyers purchasing homes after Dec. 31, 2008 and before Dec. 1, 2009; repayment requirement waived unless sold or no longer principal residence within 36 months.

"American Opportunity Tax Credit" for education: an 'enhanced' Hope credit applies to the first four years of college; it provides 100% credit for the first $2,000 and 25% for the next $2,000 on qualified expenses such as tuition and books; the credit is 40% refundable, meaning even taxpayers who have no tax liability can receive a credit for 40% of qualified college expenses, up to $1,000.

529 plans: qualified computer technology and equipment is now allowed as higher education expenses from the plan, so distributions from 529 plans to buy a computer, for example, for college will not be taxable.

Earned Income Tax Credit: increased EITC amounts for families with 3 or more children and additional marriage penalty relief.

Additional Child Tax Credit: earnings threshold is lowered to $3,000, helping more people qualify for the credit and receive more money; for 2008 the earnings threshold was $8,500
Vehicle purchase: state and local sales taxes paid for purchases of qualified new motor vehicles are deductible.

AMT: the one year typical patch for 2009 of the Alternative Minimum Tax (AMT) to prevent as many as 24 million middle-income households from being hit with a tax that was originally designed to prevent the very wealthy from avoiding taxes.

- from www.hrblock.com