The New Stimulus Tax Credit
This tax break puts up to $400 in your pocket.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, May 2009
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The stimulus provides a tax credit based on 6.2% of taxable wages in 2009 and 2010, up to a maximum of $400 each year for single taxpayers and $800 for married couples filing jointly. You won't receive a check. Instead, less tax will be taken out of your paycheck, meaning you'll get about $45 more a month in 2009 (married workers will receive an extra $65).
RELATED LINKS | |||
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5 Things to Know About the "Making Work Pay" Tax Credit | ||
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7 Misconceptions About the Stimulus | ||
Self-employed workers can adjust their quarterly estimated tax payments to benefit from the extra money this year. When you file your 2009 tax return, claim the credit, which will reduce your tax liability for the reduced payments or withholding.
The credit begins to phase out for single filers with adjusted gross income in excess of $75,000, and $150,000 for married couples filing jointly. It disappears for single filers with AGI of more than $95,000, or $190,000 for joint filers.
See More From the Stimulus Guide
New Car Sales-Tax Deduction
Car buyers have till the end of the year to grab this above-the-line deduction.
Better Benefits for the Unemployed
Qualified filers get an extra $25 a week.
New Homebuyer Credit
Take up to 10% off your purchase price.
Health-Care Subsidy for the Unemployed
Now there's extra help for paying COBRA coverage.
AMT Tax Relief
Taxpayers get a one-year fix on the alternative minimum tax.
College Aid Gets Fresh Funding
Rather than introduce big new ideas, this bill mostly replenishes underfunded programs and increases amounts available to families.
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Reader Comments (4)
Posted by: Lori at 04/30/2009 05:34:59 PM
I think the stimulus package is bogus and does no good for small businessmen & the middle income tax payers! All we're going to get out of Obama's smoke screen is more taxes! How can people be so blind as to still believes he's helping the majority of us. Great for the banks & the low income & maybe if your out of a job now, but you will pay dearly later!
Posted by: June at 05/03/2009 09:08:10 AM
Two separate thoughts here: Because I used to be a social worker, I was curious to see if those on welfare would be getting some stimulus money too -- adults who have been disabled from birth, for example, or aged people who never did have any children to take care of them in their old age and have now had a stroke. These are just a couple of examples of good people who are greatly in need through no fault of their own. But as far as I can see, only working people, or those who have worked in the past like social security recipients and a few other categories, will get stimulus money, is that correct and these people will not? Next thought: It's sad that social security recipients get so much less than employed people. Many of them can't afford the bare necessities but if I'm reading this right, they get $250, working people get $400 -- but many on social security do work! But in spite of working just like anybody else, they will get just $250, is that right? Thanks for explaining if you can. I do think social security recipients who work ought to get the full $400--of course they should!
Posted by: James at 05/07/2009 02:19:59 PM
What you continue to miss about the tax rebate is that the IRS used the wrong withholding table for the stimulus. I asked my accountant and she showed me the table the IRS sent out. Instead of having a $400 tax rebate each, my wife and I are getting $800 each. After talking to many other people, it seems that taxpayers in the 15% tax bracket are not withholding any federal taxes because of the mistake made by the IRS. This is not the only problem. Here in Arizona, the state tax is a percentage of the federal taxes. Because of the mistake in the withholding tables by the IRS, many people are NOT paying any state income tax. What does this all mean? Many people are not only going to have to pay back the extra money they received form the federal government because of the IRS mistake, they are not withholding any state taxes for the last eight months of this year. This issue was finally discovered and reported by the AP and I read it on Yahoo about two weeks ago....
Posted by: Kevin McCormally at 05/08/2009 06:39:11 PM
James, this is Kevin McCormally, editorial director of the Kiplinger Washington Editors. In response to your comment, your accountant doesn't quite have it right. As we reported at the time the new withholding tables were released by the IRS earlier this year, the agency made a deliberate decision to adjust withholding to trim single worker's annual pay-ins by about $400 between April and December. For married workers, the adjustment will trim withholding by about $600 during the same period. Why not the full $800 that married workers will get in the Making Work Pay tax credit? Because the law gives the $800 to married couples regardless of whether one or both of the couple work. So, a couple in your situation, will see a $1,200 drop in withholding but you and your wife will get just one $800 credit next year when you file. That will mean you'll owe an extra $400, or your refund will be $400 less, than otherwise. A married couple with a single worker will see a $600 drop in withholding, but will get an $800 credit -- boosting their refund by $200. This was a compromise the IRS came up with. And, I'm proud to say, I think we're the first ones to have reported on it. As for no withholding for those in the 15% bracket, I can't imagine where that idea is coming from. I'm sure that if tax withholding had stopped from my kids' paychecks, I would have heard about it. If you want to take a look at the withholding tables, you'll see that there IS withholding at that level. Cut and past this link in your browser to go to http://www.irs.gov/pub/irs-pdf/p15t.pdf] As for your Arizona state taxes, I see that your state legislature adjusted the percentage of federal tax withholding method effective May 1. By jacking up slightly the percentage of federal tax to be withheld, I assume your lawmakers wanted to avoid accidently UNDERwithholding for state purposes. I hope this helps explain things.