Federal Stimulus and You

Individuals and Families

Below are some highlights of the provisions included in the federal stimulus package that can benefit local residents.  A full summary of the key provisions is available from the Senate Finance and House Ways and Means committees, HERE. For more comprehensive information on tax relief provisions, please visit the IRS website HERE.

Making Work Pay Tax Credit - for 2009 and 2010, a refundable tax credit for up to $400/individual ($800 for joint filers).  This tax credit will begin showing up in 95% of workers' paychecks in April as an extra $13 a week in take-home pay.  Phases out for income earned above $75,000 ($150,000 joint return). 

Homeowner Affordability and Stability Plan - part of the President's broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure.  Eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac. Detailed guidelines will be available on March 4, 2009.  For more information, click HERE.

First-Time Homebuyer Credit Expands - waives repayment requirement for tax credit for first time home buyers for homes purchased after January 1, 2009.  Increases maximum credit to $8,000, removes prohibitions on financing with mortgage revenue bonds, and extends availability of credit for homes purchased before December 1. Homes sold within three years would still trigger recapture rules.

Automobile Deduction - Provides an “above-the-line” deduction for interest expense and State and local sales taxes paid on purchases of new automobiles for 2009. Phases out after $125,000 income ($250,000 for joint filers); allows for existing itemized deduction for State and local sales tax also claimed “above-the-line,” but does not allow tax exemptions for interest payments on car loans.

Earned Income Tax Credit - temporary increase in EITC for families with three or more children. Phases out for working families with adjusted gross income in excess of $16,420 ($19,540 for joint filers).

Refundable Child Tax Credit - Allows low-income families to receive refundable child tax credit in 2009 and 2010. Maximum credit is $1,000 with phase-out after $75,000 individual ($110,000 joint filers).

Alternative Minimum Tax - the bill includes a one-year provision to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax. The AMT was intended primarily for high-income taxpayers but has in recent years threatened to engulf those lower down the income scale.  In 2009, the bill increases the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals.

American Opportunity Tax Credit – makes college more affordable by expanding the existing Hope Scholarship tax credit and is worth as much as $2,500 for higher education expenses.  Phased out for adjusted gross income earned above $80,000 ($160,000 for joint filers).  The credit partially refundable, meaning lower income families with little or no tax liability could now claim some of the credit. 

Temporary Suspension of taxation of unemployment benefits.  For 2009, temporarily suspends federal income tax on the first $2,400 of unemployment benefits per recipient.  

Tax Credits for Energy-Efficient Improvements to Existing Homes – the bill includes a 30 percent tax credit, up to $1,500, for those buying high-efficiency air conditioners, heat pumps, or furnaces, replacing leaky windows or insulating their attics.  For more information, visit the Energy Star website HERE.

Unemployment Benefits Increase -- A $25 stimulus payment will be added to each week of unemployment benefits paid to eligible workers in California. The federal legislation states that these $25 stimulus payments are only payable for weeks of unemployment that start February 22, 2009, and after.  For more information, click HERE.

Health Insurance Assistance for the Jobless - the bill includes provisions to help eligible jobless workers pay for health insurance under Cobra. Cobra coverage allows newly unemployed workers to keep health insurance provided by their former employers for a period of time.  For workers who have been laid off between Sept. 1, 2008, and Dec. 31, 2009, the government will subsidize 65% of their premiums under Cobra for up to 9 months.  Those people laid off between Sept. 1, 2008, and the day the stimulus law goes into effect, and who did not sign up for Cobra, will get an additional 60 days to do so and receive the subsidy.  The subsidy will be limited to those whose income for the year is $125,000 or less ($250,000 for couples filing jointly). Your former employer is responsible for notifying you of your eligibility for the COBRA subsidy included in the stimulus legislation.  These notices should come within 60 days. If you were just laid off, COBRA notices should be sent within 44 days of your last day on the job.  For more information, contact the Employee Benefits Security Administration HERE.