What the Recovery Act of 2009 means for you and your family
By Starrla Cray
With the hope of stimulating the US economy, the Federal government recently unleashed a $787 billion stimulus plan officially called the American Recovery and Reinvestment Act (ARRA) of 2009.
The money will be used for both spending and tax relief, including several tax credits that could benefit Minnesota households. Below is a summary of some of the more common stimulus information.
College tax credit. Students will get a break, with a $2,500 higher education credit that’s available for the first four years of college. To learn more, visit www.finaid.org/otheraid/tax.phtml.
Computers as an education expense. Computers and computer technology will qualify as education expenses in 529 education plans for the tax years beginning in 2009 and 2010. For information on how to apply for a 529 plan, go to www.savingforcollege.com.
Discount on vehicle purchases. State and local taxes can be deducted on purchases made in 2009 on cars, light trucks, motorcycles, or motor homes (up to $49,500). To qualify, and individual must make less than $125,000, or $250,000 for a family.
Home-buying incentive. First-time homebuyers (people who haven’t owned a principal residence for three years before buying a house) are eligible for a tax credit of up to $8,000 if they purchase between January 1 and December 1 of 2009. The tax credit does not have to be repaid and can be claimed on taxes for 2008. To apply for the credit, purchasers can claim it on their IRS Form 1040 tax return. The credit will be shown on Form 5405, attached to the 1040. The 5405 form is available at www.irs.gov. A PDF with frequently asked questions regarding the $8,000 tax credit is available at www.realtor.org/wps/wcm/connect/
Note: People who purchased a home in 2008 and received a $7,500 credit will still be required to repay the money over 15 years, starting with their 2010 tax return.
Credits for families. The expanded earned income tax credit provides tax relief to families with three or more children and increases marriage penalty relief for 2009 and 2010, accounting firm Piehl, Hanson, and Beckman stated in a letter. The expanded child tax credit increases eligibility of the refundable child tax credit in 2009 and 2010 by lowering the income threshold to $3,000. (It had been $8,500 in 2008.)
Retiree payment. People who receive Social Security or Supplemental Security Income, disabled individuals, retirees, Railroad Retirement beneficiaries, and veterans receiving disability income will receive a one-time payment of $250 this summer. According to the Social Security Administration web site, everyone who is qualified for the payment should have the check by late May 2009. No application is needed. To learn more, go to www.ssa.gov/payment
Energy-savings benefits for individuals. Smith and Gesteland accounting firm (www.sgcpa.com) provides information about energy-saving benefits for individuals:
• Transit benefits
• Residential energy property credit
• Residential energy-efficient property credit
• Plug-in electric vehicles credit
Transportation project funding. Using federal stimulus funds, state projects are slated to begin construction in Greater Minnesota as early as this spring and total $180 million, according to a press release from the Minnesota Department of Transportation. These city and county projects are in addition to the 60 state highway projects announced in February. The $75 million in projects include 22 road projects, 22 bridge projects and several state and local partnership projects. A list of the projects is available on Mn/DOT’s Web site at http://www.dot.state.mn.us/.