Stimulus Plan Tax Credits

Agreement on an economic stimulus package has many hoping this recession will end sooner rather than later. But how is it expected to affect the average american in the next few months? Kelli Grant, Senior Consumer Reporter for Smartmoney.com, gives us the details.

First on the list is a $400 tax credit. Under the stimulus plan, every worker will receive a payroll tax credit of up to $400. That adds about $13 a week to most people's paychecks, and it should start showing up somewhere between a few weeks from now and June. If you make more than $100,000 as a single filer, you won't receive this credit.

The stimulus plan will also help out first time home-buyers. Before the plan's passage, home-buyers who bought a house between April 9 of last year and the end of June 2009, received a tax credit of 10% of the home's price, or a maximum $7,500. But that credit had to be paid back over 15 years. Now, as part of the stimulus, home-buyers who bought this year don't have to pay the money back. The credit is extended to those who buy a home through the end of August. There's also talk that it could be worth as much as $8,000.

Unemployment benefits will be improved. Americans who are currently unemployed can now claim up to 33 weeks of benefits through December. Benefits will increase by $25 per week for some 20 million jobless workers. The first $2,400 in unemployment benefits you receive is also now exempt from federal taxes.

There is also a new car credit in the stimulus plan. Those who buy a new car can deduct state and local sales and excise taxes. The purchase price limitation cap is $49,500. So if you pay more for a new car, you'll still pay taxes on the portion above that cap. The deduction also starts to phase out if you make $125,000 or more a year.

Finally, college students will be getting more help. The new American Opportunity Education tax credit offers up to $2,500 toward college tuition and related expenses for 2009 and 2010. It replaces the Hope Scholarship Credit, which offered a maximum of $1,800. While the Hope Credit only applied to tuition paid for the first two years of post-secondary education, this law makes the new credit applicable to the first four years.

For more information on the stimulus bill and other financial news, please visit SmartMoney.com.
by Kelli Grant and Jenn Eaker
  • CBSNews

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