Tax Benefits In The Stimulus Plan
The American Recovery and Reinvestment Act (the Stimulus Plan) is the first step in jumpstarting our economy by helping save jobs and strengthening the middle class. I would like to share some of the benefits that you and other Iowans might receive during 2009 and 2010 as a result of this remarkable legislation.
"Making Work Pay" Tax Credit:
During 2009 and 2010, the stimulus will provide a refundable tax credit up to $400 for individuals and $800 for joint filers, which is a tax cut for more than 95% of working families. This tax credit will be calculated at a rate of 6.2% and will phase out for taxpayers with an adjusted gross income in excess of $75,000 for individuals and $150,000 for joint filers. Most Iowans will see an increase in their take-home pay, as their employers withhold less from their paycheck starting this spring. Taxpayers can also claim this credit on their 2009 tax return.
Economic Recovery Payment:
A one-time payment of $250 will be made in 2009 to Supplemental Security Income (SSI) recipients, as well as retirees and disabled individuals receiving benefits from the Social Security Administration. Additionally, Railroad Retirement beneficiaries and disabled veterans who receive benefits from the U.S. Department of Veterans Affairs will also receive checks. Recipients normally receive benefits in the form of a check or direct deposit and should expect to receive their benefits around May 2009 in the same form. Individuals will not be eligible to receive more than one payment. Individuals who are both working and receiving a qualifying benefit will be eligible to receive the $250 payment, but this benefit will be deducted from any amount they would be eligible to receive from the "Make Work Pay" tax credit. Finally, this payment will not be subject to federal income tax and will not be considered income which could reduce a person's SSI benefits, or any other federally-funded means-tested benefits programs like food stamps and Medicaid.
"American Opportunity" Education Tax Credit:
During 2009 and 2010, Iowans who seek a college education will receive a tax credit of up to $2,500 for the cost of tuition and related expenses paid during the taxable year. Taxpayers will receive a credit on 100% of the first $2,000 in tuition and related expenses (which includes books), paid during the taxable year, and 25% of the next $2,000 of tuition and related expenses. This tax credit would phase-out for taxpayers with an adjusted gross income in excess of $80,000 for individuals and $160,000 for joint filers.
Refundable First-Time Homebuyer Credit:
Last year, Congress provided taxpayers with a refundable tax credit equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers who received this tax credit were required to repay any amount received under this provision back to the government. The stimulus increases the tax credit to a maximum of $8,000 and waives the required payment for homes purchased between January 1 and June 30, 2009. However, homebuyers who sell the home within three years of purchase will still be required to repay the tax credit. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for joint filers).
The stimulus also offers many other benefits to Iowans, including:
Tax deductions for state and local sales taxes paid on the purchase of new cars, light trucks, recreational vehicles and motorcycles in 2009, subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 for joint filers);
Temporary suspension on taxing the first $2,400 of unemployment benefits in 2009;
Increase in unemployment benefits by $25 a week through 2009;
Increase in Pell grants by $500 for the 2009-2010 academic year.
I recognize that the stimulus package seems large in size and scope, but I am confident that the tax cuts will have a positive impact on many Iowans and help them in these difficult economic times.