Stimulus Bill - Change Happened

The President will sign the Stimulus Bill on Monday 2/16/2009. Many Personal Finance rules will change on Monday and it is important that you know the new rules. Many aspects of this bill are very good and understanding its impact is very important.

Personal Finance Tax Changes

* $400 payroll tax credit for workers earning up to $75,000; married couples filing jointly get $800 for income up to $150,000
* Increase in earned income tax credit for working families with more than three children
* Increased eligibility for refundable child tax credit, with all income over $3000 qualifying
* Tax credit of up to $2500 for tuition and college expenses
* Computers and computer technology will qualify for inclusion in tax-advantaged savings plans * A tax credit for first-time homebuyers increases from $7500 to $8000, and will not have to be repaid
* Taxpayers earning less than $125,000 can deduct sales and excise taxes paid on new cars
* $2400 of unemployment benefits will not be subject to federal income tax
* Middle-income taxpayers get an exemption from the alternative minimum tax of $46,700 for an individual and $70,950 for a married couple $69,759

Bottom Line: More money will be coming your way this year. Incentives are in place for cars, first time homebuyers, and education. The bill is pro family. The impact of these changes can be more precisely computed once the specifics are known.

Energy Tax Credits

* 30% cap on tax credit for energy efficiency purchases by homeowners, up to $1500 per residence
* Credit for purchase of residential solar, geothermal, wind and fuel cells

Bottom Line: Before purchasing any major appliance for your home, you need to determine if the appliance qualifies for the energy efficiency tax credit. You can get a tax credit for alternative energy options.

Additional Income

* One-time payment of $250 for retirees, disabled people, SSI recipients, railroad retirees and disabled veterans
* One-time refundable tax credit of $250 for some government retirees not eligible for social security benefits

Bottom Line: Retirees and people who need a little more will get a little more.

Remember a tax credit reduces the amount of taxes owed on a dollar for dollar basis. It is far superior to a tax deduction.

What's missing? Incentives aimed at reducing mortgage rates is missing. Since it is missing, it means that now is a good time to refinance your mortgage if you have a mortgage rate over 5.5%. It is very easy to get a 5.0% rate on a 30 year loan and a 4.75% rate on a 15 year loan.