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PREVIOUS ISSUES
The new Congress will hit the ground running on tax cuts. House taxwriters have already approved a big package to help jump-start the economy and get extra money into taxpayers’ wallets, and the Senate will follow soon, with the goal of getting a bill to President Obama’s desk by mid-February.
The House tax bill is a good blueprint for what will eventually pass because it contains a number of Obama’s campaign promises on taxes, such as a payroll tax credit for individuals. The House’s proposed credit would equal 6.2% of earned income in 2009 and 2010, capped at $500 for single filers and $1,000 for joint filers each year. It would be phased out for higher-incomers -- between $75,000 and $100,000 of adjusted gross income for single filers and between $150,000 and $200,000 for married couples.
Taxpayers won’t have to wait until they file their 2009 returns to get the credit. Congress will probably instruct the IRS to adjust withholding tables so that the tax relief will show up in paychecks later this year. Since self-employeds don't benefit from a change in the withholding tables, they can reduce their estimated payments by the amount of the credit and claim the credit when they file their tax returns for 2009.
Early indications are that the Senate’s proposals will dovetail with the House measure. For example, Senate tax leaders have a plan that includes a nearly identical payroll tax credit. Theirs comes with a twist, though: To make up for not receiving the payroll tax credit, retirees would get a onetime payment of $300. The House will probably go along with this to avoid alienating a key voting group.
Other tax breaks for individuals in both the House and Senate packages:
- Increasing the maximum Hope credit for college costs. The Hope credit limit would rise to $2,500 per student per year in 2009 and 2010, up from $1,800, and be made available for four years of college, not just the first two. The credit would also cover the cost of books and be refundable for more middle-income taxpayers.
- Enhancing the first-time home buyers’ credit, which was enacted last year. Under current law, the credit, which is capped at $7,500 and applies to purchases of primary homes after April 8, 2008, and before July 1, 2009, must be repaid over 15 years, starting two years after the credit is claimed. In the House and Senate proposals, folks who buy homes in 2009 don’t have to pay back the credit as long as they don’t sell the house within three years.
- Increasing the tax credit for energy saving home improvements and extending it through 2010. The credit is likely to be raised to 30%, from 10% now, with a cap of $1,500 rather than $500. Improvements that qualify for the credit include energy efficient skylights, windows, outer doors, water heaters, central air conditioners and biomass stoves.
- Aiding low-incomers by increasing the earned income credit for families with three or more children and allowing a bigger share of the child tax credit to be claimed in cases where the credit exceeds a taxpayer’s income tax liability.
Businesses will also get pieces of the tax cut pie. Among them:
- Allowing companies to carry back most or all of their losses for five years instead of two, except for firms that received special aid payments from Treasury. That will give significant relief to home builders and other unprofitable industries.
- Reviving 50% bonus first-year depreciation for assets purchased in 2009.
- Continuing the higher $250,000 limit on expensing assets through 2009. Full expensing will remain available until $800,000 of assets are placed in service this year.
- Extending the renewable energy credits for wind, solar, geothermal, biomass, etc. In addition, Congress will eliminate dollar caps.
- Expanding the work opportunity credit to cover businesses that hire out-of-work youth between ages 16 and 25 or unemployed veterans.
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POSTED BY: Dan Cassone (January 27, 2009 09:30 AM)
$350 billion given to banks unconditionally? What did we the consumer get from that? The stimulus package? Mine went to pay for gas and oil. The government is in a panic and no one seems to know the simplest answer. While the interest rates for banks were being cut to 0, most consumer borrowing rates stayed the same or went up. The answer to the recession? Just make it LAW to lower all interest rates to 4%. Think about it. It will help the housing industry which in turn will help the banking industry which will help the consumer buy more because he will have more money and more lending power. Then all of that will help our business's bounce back. Everyone seems to gain from this. HURRY LAWMAKERS!!!
POSTED BY: JD (January 27, 2009 05:37 PM)
It's not a tax cut if it's money being shoveled out to people who have no tax liability. There's nothing to cut. This is welfare. While we're at it, how about at least defining the income limits in terms of taxable income, not AGI? Using AGI skews things against people with unusual circumstances.
POSTED BY: Heather (January 28, 2009 07:48 AM)
Dan - 4% interest sounds great, but it doesn't help when someone with perfect credit, who put 20% down on their house and has been making extra payments to their mortgage can't refinance because the bank's appraiser says that the home is worth 15% less than when it was purchased two years ago. This is hurting those who have done everything "right".
POSTED BY: GRH (January 28, 2009 11:32 AM)
Trim this, credit that, certain groups get help, others get the shaft. This is the perfect time to dump the existing tax system and go directly to the Fair-tax (not to be confused with the flat tax). Just think, everyone keeps there entire paycheck immediately increasing working families income. No business taxes would generate a tremendous incentive for companies to locate in the US and hire more workers. The demand for workers goes up, and wages with it. In that the Fair-tax only taxes retail goods and services, if you are a buying used items or consignment, you wouldn't pay any tax. Best of all, April 15th is just like any other day on the calender instead of the dreaded IRS day of "that's the governments money now day."
POSTED BY: J. Rapp (January 28, 2009 01:38 PM)
This is not a stimulous bill. It is a spending bill to provide money to fund the social engineering the liberals want. It will reward those who do not work (welfare) at the expense of those who have worked, sacrificed and played by the rules. Americans are not that stupid. They know what this is!
POSTED BY: Paul (January 28, 2009 02:19 PM)
In this article about the first-time home buyers’ credit, Joan Pryde indicates that "In the House and Senate proposals, folks who buy homes in 2009 don’t have to pay back the credit as long as they don’t sell the house within three years." Does that mean that those of us who qualified for this credit in 2008, in fact, do have to pay back the credit. If so, it doesn't seem fair for those individuals.
POSTED BY: MM (January 28, 2009 11:16 PM)
It doesn't make sense for some first time home buyers to have to pay back the credit and not for others.
POSTED BY: Joan Pryde (January 29, 2009 11:14 AM)
I'm Joan Pryde, the author of the article, and wanted to respond to the comments regarding the "no payback" provision for the home buyer credit. Yes, that jumped out at us too. Although I guess the idea was to stimulate home sales going forward, we still thought it was strange that people who bought homes in 2008 would not get the relief.
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