Economic Stimulus

The economic stimulus is money that is given to individuals who will then use that money to buy things, thus stimulating the economy. The economic stimulus plan that has been outlined by President Obama contains a number of parts to help stimulate the economy, create jobs and give tax-relief to Americans. The stimulus will cost the government approximately $787 billion. The plan has not been finalized, so we are not fully aware of everything the package will include at this time.

The largest part of the plan is the “Making Work Pay” tax credit.  This credit will help many people who are living paycheck to paycheck by giving a little extra breathing room.  Each paycheck will have less taken in taxes, giving approximately $60 extra in take-home pay.  In addition to this tax credit, there will be more money going to the Food Stamp program, an expanded earned-income credit along with the ability for more people to qualify for the child-tax credit.

For workers that have lost their jobs, the economic stimulus will hopefully assist to put them back to work.  For those that are not able to return to work, the stimulus offers additional unemployment benefits.  Unemployed persons will now be able to receive unemployment benefits for a full 59 weeks, compared to the 26 weeks it was in the past.  The compensation will also slightly rise, giving them additional $25 per check.  The first $2,400 of unemployment benefits will not be claimed on the 2009 income taxes.  This gives the average unemployed worker their first 10 weeks of unemployment pay tax-free.  In addition to adding more pay to the unemployed for a longer period of time, the government will also help with COBRA health care by paying approximately 65% subsidy on premiums.

In order to assist with sales of big-ticket items, those who buy a car, truck or motorcycle will be able to deduct a portion of the sales tax.  This will include all vehicles priced up to $49,500.   Although the savings is not huge, it can assist tax payers with up to 25% of the sales tax paid.  Those who purchase an electric car will be eligible for larger tax credits, $2,500 and an additional $5,000 depending on battery life.

Homeowners will also receive large incentives.  Upgrades that are made to the home, making it more energy efficient will allow owners to claim a 30% tax credit, up to $1,500 per project.  These upgrades include windows, doors, roofs, insulation, heating and air-conditioning systems and hot-water heaters.  First-time home buyers who purchase between January 1 and November 30 are eligible for an $8,000 tax credit if they stay in the home for at least three years.

The current “HOPE” student tax credit is being replaced with the “American Opportunity” student tax credit.  The American Opportunity credit allows students to receive up to $2,500 for tuition, books and fees.  Low-income students that receive the Pell Grant will also be happy to hear that the benefit will rise to $5,350 this year and $5,500 next year.  President Obama is very serious about each and every child finishing school and attending college, giving the American Opportunity credit and raising the Pell Grant will give more people the opportunity.