Tax Credits and Tax Benefits from the Stimulus Package a.k.a The American Recovery and Reinvestment Act of 2009

Today, President Obama signed into law the American Recovery and Reinvestment Act (ARRA) that both houses of congress passed on Saturday. Inside of the bill, there’s a lot of different spending programs in infrastructure, healthcare, education, and energy, but $288 billion of the $787 billion dollar as is tax credits, tax deductions, and tax cuts. So what kind of tax benefits will you personally get from the stimulus package? Here are the possibilities:

First Time Home Buyer Tax Credit - There’s an $8000 first-time homebuyer tax-credit. Unlike the previous tax-credit, you do not have to pay the credit back over the course of the next few years after owning your home. This means that if you’re a first time home buyer in 2009 and you make less than $75,000 a year (or $150,000 for married couples), you’ll essentially get an $8000 check from the IRS for doing so. It’ll be applied directly to your tax bill at the beginning of next year, and since most people will have already paid all of their taxes, they’ll get that money in the form of a big, fat, $8000 refund check next spring. Click here to read our full-article about this tax credit.

Tax Credits for Individuals and Couples - If you make less than $75,000 a year (or make less than $150,000 per year as a family), you will receive a $400 tax credit. Families that are married-filing-jointly will receive an $800 tax credit each. After reaching the income limitations, the tax-credit will slowly phase out as you make more income. With these tax credits, you won’t be getting another check in the mail; rather, you’ll simply be paying those much less in taxes next year.

Increase in the Alternative Minimum Tax Limit - There’s a provision in the legislation totaling $70 billion which will prevent many people who have a lot of deductions and make moderate to high incomes that are getting with hit by the Alternative Minimum Tax (AMT). This won’t affect your 2008 taxes, but for your 2009 earnings, but for your 2009 income taxes, families can expect to save about $500.00 on incomes between $75,000 and $100,000. For families that make in the upper five figures, they can expect to pay $4800 less in AMT on their income between $200,000 and $500,000.

College Tax Credits - The bill contains an extra $2,500 tax benefit for those paying tuition and related expenses in 2009 and 2010 that’s on-top of the HOPE scholarship and the Lifetime Learning Credit which already helps decrease the tax-burden of college students and families with college-students. To qualify for this tax credit, you’ll need to make less than $80,000 a year as an individual, or $160,000 as a couple married filing jointly.

Increased Earned Income Tax Credit – There will be an increase in the ‘earned income’ tax credit that will provide help to lower-class families. Essentially, the updated earned-income tax credit will total $5,600 for the year of 2010

Vehicle Tax Credit - Individuals purchasing new cars and trucks will now be able to claim deductions for any sales or excise taxes that they have to pay on their vehicles. This is an ‘above the line’ deduction, so you won’t have to itemize your taxes to qualify it. There are some income limitation and deduction limitations with this credit, so be aware of that.

It’ll take the IRS some time to calculate the phase-outs for some of the deductions and credits that have income limitations, so we’ll have to wait for those. If you’re slightly above the $75,000 mark, you can expect to get some benefit from the legislation, but probably not the entirety of the amounts listed.