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Financial Planning

What the Stimulus Means for You

Whatever its impact on the overall economy, the plan will give your finances a jolt.

You'd definitely want something to show for spending nearly $800 billion, and lawmakers hope a wide-ranging stimulus package will breathe life into our economy.

Mark Zandi, of Moody's Economy.com, figures that the package (at least the one headed for enactment at press time) will give some two million people jobs they wouldn't otherwise have had by the end of 2010 -- and as many as three million by late 2011. It could add one percentage point to economic growth in 2009, and just under two points in 2010.

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That's the big picture. There's plenty to boost your bottom line, too, including:

1. A bigger paycheck. Starting in the second half of this year, you'll see a little extra in your envelope from a reduction in the amount withheld to cover income taxes -- up to $400 for individuals and $800 for couples, both this year and next. The credit will be phased out for high-income taxpayers, starting at adjusted gross incomes of $75,000 for singles and $150,000 for couples.

2. A bonus for retirees. If you collect Social Security, Supplemental Security Income, or veterans' disability or retirement benefits, look for a $250 check this summer.

3. Relief from the AMT. Critics grumble that a temporary fix aimed at keeping middle-class families from paying the alternative minimum tax would have been enacted anyway -- as it has been for the past several years -- so the measure doesn't belong in a stimulus bill. Nonetheless, expect a $500 increase in the AMT exemption for individuals, to $46,700, and a $1,000 increase for couples, up to $70,950. The move would free 26 million families from the AMT in 2009.

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4. A tax break on new wheels. If you buy a new car, light truck, motorcycle or motor home this year and spend up to $49,500, you can deduct state and local sales taxes (most states levy about 6%). Individuals who make less than $125,000 and families making less than $250,000 qualify. You get the deduction whether or not you itemize on your return. A family that makes $150,000 a year and buys, say, a Dodge minivan could save about $420. Buy a plug-in hybrid and you could get a credit of up to $7,500.

5. An incentive for home buyers. A tax credit of up to $8,000 for first-time buyers has been extended through November. Those who buy in 2009 won't have to pay the credit back, as must those claiming the credit for 2008 purchases. For all homeowners, the cap on credits for energy-efficient improvements, such as new windows or insulation, has been raised from $500 to $1,500.

6. A break on college tuition. A beefed-up Hope (now American Opportunity) credit will max out at $2,500, up from $1,800. Qualifying income limits rise to $80,000 for singles and $160,000 for couples. Does your college student need a PC? You can use money in your 529 account to buy one -- or Internet access -- this year or next.

7. Lifeboats for the laid-off. Those who remain on their former employer's health-insurance plan will get a 65% subsidy for up to nine months. The first $2,400 in unemployment-insurance benefits this year will be tax-exempt.

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