Many taxpayers might have interesting, if not obvious, reasons to investigate potential tax breaks within the new economic stimulus plan. More than $300 billion reasons, as over a third of the fiscal stimulus bill is created by tax cuts.
The most straight-forward of tax credits involve a large number of the population, the first-time homebuyers, in the form of an $8,000 tax credit for buyers if they purchased a home during 2009. The credit may get a little tricky in that they may also file for the one time credit on their 2008 taxes, as long as the home was purchased in 2009. The phase out curve starts with AGI above $75,000 for single filers, and $150,000 for joint filers.
Another segment of about 7 and a half percent of the country, the unemployed, will immediately realize a $2,400 shelter of benefits that will not be taxed.
One more direct attempt to boost domestic sales with fiscal policy is in the automotive sector with an above-the-line deduction for the sales tax paid on a new car purchase in 2009. The deduction cuts off at purchase prices above $49,500. Once again there is a phase out income cure starting at AGI of $125,000 for single, and $250,000 for joint filers.
AMT Relief
The economic stimulus plan sets the exact alternative minimum tax exemptions now as opposed to the end-of-year ‘patch’ delay Congress has forced taxpayers to wait in recent years. The exemption amounts are $46,700 for single/head of household filers and $70,950 for joint filers. Without the new ‘patch’ the amounts would have lowered to $33,750 for singles and $45,000 for couples, per prior tax legislation. Experts say the net result of the new amounts is that fewer people should be subject to the AMT.
Another interesting stimulus idea is a $400 credit for single workers and an $800 for couples. The credit will be available in both 2009, and 2010, but again has the phase out curves. Starting with an AGI of $75,000 for single filers and twice that for married-filing-joint filers, the “make work pay” credit starts phasing down.
An expanded child tax credit may be an actual refundable credit that will affect many taxpayers across the board. Up to one thousand dollars per child will now be available to those in the lowest income bracket, and starts with an income of $3,000 as opposed to the current tax law, which requires income of $8,500 and up to be eligible for the child tax credit. The earned income credit has also been expanded in a like manner for the lower income workers.
The Hope college education credit has been renamed in the stimulus package to the American Opportunity Tax Credit, and has been expanded for taxpayers with children in college. The phase-out amounts were also raised to allow more taxpayers the ability to take the credit.
There is an expansion of the mass-transit pre-tax deduction for taxpayers whose employers participate in this plan.
That’s the breaks in the business.
The recovery plan has a few credits, tricks and perks for small businesses. One is relaxing tax estimations for small businesses that may stimulate the economy. Experts say there are a lot of perks in the bill for small businesses and that although the taxes are still owed the lower estimations should allow for a greater liquid cash flow for the year.
The net operation loss carry back provision has been expanded from two to five years for businesses with fifteen million or less in gross revenue. This may be a blow to big businesses that make up almost 95% of the job market. Search La Jolla Homes and La Jolla condos for sale.