Tax breaks a key ingredient of stimulus package
Details about the latest stimulus package continue to pour in, and one thing is certain: The legislation will keep tax preparers hopping.
Consider these provisions that made their way into the final bill.
"Making Work Pay": This tax credit "will be figured as 6.2 percent of taxable wages, to a maximum of $400 for single filers or $800 for joint filers," according to CCH. "The credit begins to phase out at adjusted gross incomes of $75,000 for single filers and $150,000 for joint filers, diminishing by 2 percent of any amount above those levels."
Another AMT patch: The alternative minimum tax exemption has been reset to $46,700 for single filers and $70,950 for joint filers. That should keep millions of taxpayers from having to pay the notorious AMT ... for now.
American Opportunity Credit: This tax credit can be used for post-secondary educational expenses "incurred in up to four years of study," writes CCH. "In effect, it will also largely replace the existing Lifetime Learning Credit for college expenses over the next two years."
Earned income, child credits: The phaseout range of the Earned Income Tax Credit has been raised. In addition, a new provision takes income starting at $3,000 (rather than $8,500) into account when calcultaing how much of the child tax credit can be refunded.
Tax credit for first-time homebuyers: The maximum tax credit for first-time home buyers has been raised to $8,000, and a requirement that the credit be repaid within 15 years has been removed.
Provisions also have been enacted to spur new-car sales, to encourage the creation of so-called "green" jobs, and to encourage people to serve the public good.
There are also a slew of provisions that benefit small businesses, including (a) one that allows small businesses to, according to CCH, "apply the loss to previous years’ income for as many as five years before the year in which the loss takes place"; (b) an extension of provisions that encourage small businesses to invest in equipment; and (c) a provision that "temporarily shortens, from 10 to 7 years, the holding period for assets subject to the built-in gains tax imposed after a C corporation elects to become an S corporation," CCH reports.
- Read CCH's comprehensive summary of the tax provisions.
- Read Eileen Ambrose's Q&A about the tax breaks in the Baltimore Sun.
Meanwhile, states have been crunching the numbers to find out exactly what they'll be receiving from the stimulus package.
In Maryland, Gov. Martin O'Malley says the plan means $3.8 billion and about 66,000 new jobs. "That means valuable investment in infrastructure, access to quality health care and education funding," O'Malley said.
Other states aren't as fortunate. In this National Public Radio report, Washington Gov. Christine Gregoire says her state will receive much less than she had hoped. "So there will be disappointments, no question about it," she says. "But in the long haul, as President Obama put it, it may not be perfect, but let's get going."
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