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What the stimulus package will do for you? - from the Dolans at Dolans.com
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#1: First-Time Homebuyer Credit Extension and Increase

This is a good one if you are a first time homebuyer, especially if you close on your home after January 1, 2009.

The maximum credit was raised from $7,500 to $8,000. Plus, this credit has now been extended until November 30, 2009. And best of all, unlike last year’s first-time homebuyers credit, you do NOT have to pay it back in a 15-year interest-free loan... as long as you close on the home between January 1 and November 30 of this year!

With this kind of credit, now’s a good time to really figure out if it’s finally worth it to buy your first home, so take a look at Should I Rent or Buy?

#2: Making Work Pay Credit

This tax credit gives you a credit against your income tax equal to 6.2% of your earned income or $400 (whichever is less).

This credit starts retroactively for the whole of 2009 and will continue through 2010.

Keep in mind your modified adjusted gross income can’t be more than $75,000 (or $150,000 for married, filing jointly). You can collect this credit through either a reduction in your withholdings or in a lump sum after filing your returns for the year. Not bad!

#3: Energy Incentives

Energy credits abound in the new tax law!

We’ve now got a higher Residential Energy Property Credit, which goes up to 30% of qualified expenses with a higher $1,500 cap. This applies towards the purchase of energy-efficient appliances such as heat pumps, qualified gas, propane and oil furnaces, as well as other energy-saving materials such as insulation and exterior windows and doors.

Also, the new law removed the $4,000 credit cap previously in place on installing qualified small wind energy systems. You can now take a credit for 30% of your cost.

Plug-in electric vehicles, which aren’t yet on the market, will have a $2,500 credit.

So... it definitely PAYS to “go green.” Be sure to take a look at other ways to save money by going green.

#4: $250 Economic Recovery Payment

This one-time $250 payment is dedicated to those on fixed incomes — including Social Security recipients and disabled veterans. Retired government workers that aren’t eligible for Social Security also qualify.

The name says it all — if you qualify, you’ll receive a one-time payment of $250. (However, keep in mind that if you received a Making Work Pay credit, this payment would be reduced accordingly.)

#5: Qualified Tuition Program Enhancements

For 2009 and 2010, your student can use their tax-free 529 distributions to pay for a new computer, software and even Internet access charges, along with other computer-related expenses.

Prior to this, these types of costs didn’t qualify as higher education expenses — so they didn’t follow the “rules” that governed 529 distributions. To qualify, your student must be enrolled at an eligible educational institution.

To find out more on how a 529 college savings plan works, check out The Absolute Best Way to Save for College.

#6: New Car Deduction

This provision was a late-breaking surprise. You’ll receive an above-the-line deduction for state and local sales taxes or excise taxes paid on the purchase of a new car. However (as always), there ARE limits.

First, once your income exceeds $125,000 (or $250,000 if you’re filing jointly), this deduction will begin phasing out. Also, the deductible taxes can’t exceed taxes associated with the first $49,500 of a vehicle.

So if you buy a car for $40,000 and your sales tax is 5%, your deduction would be $2,000.

Keep in mind lease arrangements don’t qualify and you need to purchase your vehicle in calendar year 2009, but only AFTER President Obama signed the stimulus bill into law. (Sorry if you bought your car before February 17th!)

#7: AMT Patch

This patch raises exemption incomes, albeit slightly, in an effort to protect 26 million middle-class Americans from having to pay the alternative minimum tax (AMT).

If you’re filing jointly, the exemption amount for 2009 is $70,950 (up from $69,950 in 2008). And if you’re a single or head of household, you’re now exempt up to $46,700 in income (up from $46,200).

AMT patch or not, you may need to find other exemptions and deductions in order to NOT get eaten alive in taxes this year. Here are 11 tax deductions you don’t want to miss!

#8: Education Credit Enhancements

If you or your child is in college, pay attention to this one.

The newly-named American Opportunity Tax Credit (formerly known as the HOPE education credit) has increased the maximum credit from $1,800 to $2,500 when applied for in 2009 and 2010. This is based on 100% of the first $2,000 and 25% of the next $2,000 in qualified expenses.

The credit is extended to all four years of college and now even covers items such as books and other course materials.

Finally, the phase-out income goes up to $80,000 for singles and $160,000 for joint filers.

Need more help with college expenses? Don’t miss Help Your Kids Win Scholarships

#9: Child Tax Credit Increases

The stimulus bill extends for 2009 and 2010 the lower, $3,000 income threshold of the child tax credit. This increases the refundable portion of the credit for lower-income taxpayers.

To qualify, the child must be a U.S. citizen, under 17 years old (as of December 31, 2008), and must have lived with you for at least six months of the tax year.

Current income limits are $75,000 for single or head of households and $110,000 for married, filing jointly.

#10: Earned Income Tax Credit (EITC) Increase

The EITC is geared to help working families with lower incomes. To address this group during these troubling times, the American Recovery and Reinvestment Act of 2009 has allowed a temporary increase in the amount of this credit for 2009 and 2010.

Bottom line: For working taxpayers with three or more children, the new law raises the credit percentage to 45% of the first $12,570 of earned income. (Prior to this law passing, it was 40% for families with two or more children.)

#11: Unemployment Compensation Exclusion

Unfortunately, this is one a few of you may qualify for — either now or in the not-too-distant future....

If you’ve ever received unemployment benefits, you know that the compensation is included in your gross income, subject to taxes. But the new law excludes up to $2,400 of this compensation from your gross income for 2009.

If you’re one of the lucky ones who’s still gainfully employed, make sure you keep it that way. Take a look at 7 Steps to Protect Yourself from a Layoff.

#12: Transportation Benefits

If your employer covers some of your transportation expenses, including parking, van pooling, and rail passes, then you know that a specific portion of those benefits aren’t included in your income.

Until this new law was passed, you could have up to $120 a month in these types of expenses excluded from your income. Now the maximum has almost doubled to $230 a month starting in March 2009. This higher maximum will continue through at least 2010 with an adjustment for inflation.

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