Americans are in line for several tax breaks under the $787 billion stimulus package that President Barack Obama is expected to sign into law today.
I answered several questions in my Sunday column, but readers continue to have plenty of others about how the tax breaks will affect them. Here are answers to some of your e-mails:
Is every worker making under $75,000 and single getting the Making Work Pay credit? Yes. The credit is worth up to $400 a year, this year and next. (Married couples filing joint returns can receive up to $800 a year, with the credit starting to disappear once incomes reach $150,000.)
The credit is roughly $15 a paycheck if you're paid every other week. The government will draw up new tables by late spring so employers know how much to adjust your tax withholding to get the credit into your paycheck, says Barbara Weltman, author of J.K. Lasser's 1001 Deductions & Tax Breaks.
The credit will be retroactive to Jan. 1. If it starts appearing in paychecks in July, you could see your paycheck go up by about $30 to make up for the first half of the year, Weltman says. The amount would go down next year, but you would get it all year.
My husband and I are both retired and receive Social Security besides other retirement income. Does this mean that we get $250 each from the stimulus package? Yes, say the tax pros at CCH, an Illinois provider of tax information.
For retirees not eligible for the Making Work Pay credit, Congress created a one-time payment of $250. The Treasury Department is supposed to get the money out no later than June 17, Weltman adds.
How does the $8,000 first-time homebuyers' tax credit work? Will those who qualify receive a check after they've filed their taxes? This is the best kind of credit: a "refundable" one.
First, the credit will reduce your bottom line tax bill. If the credit is larger than your tax bill - or you don't owe any taxes - you will get any excess credit in the form of a refund.
My research indicates that you can claim last year's $7,500 first-time homebuyer credit one year, and then claim the $8,000 credit on next year's return. Is this too good to be true?
Sorry. You get one credit or the other, depending on the year you bought the house, Weltman says.
Does the first-time homebuyer's credit apply to buying into a retirement community? Often in retirement communities, you buy the right to live in the residence for life, but after you die you cannot leave the property to your heirs, Welftman says. In that case, it would not qualify for the first-time homebuyer's credit, she says.
Also, to qualify as a first-time homebuyer, you cannot have owned a house in the previous three years.
Does the new-car sales tax deduction apply to vehicles purchased as of Jan. 1, 2009?
No. You will be able to deduct sales tax on new vehicles acquired on the day the legislation becomes law and throughout the rest of the year.
In doing my return for 2008, I was surprised (pleasantly!) to see that I was not required to pay the Alternative Minimum Tax after having to do so in the past. Was this the result of legislation? If so, does it have inflationary conditions built into it for future years?
Congress last fall passed a one-year patch to the AMT, a tax designed to snag the rich but now entraps millions of others. The economic stimulus package includes another temporary fix. For the 2009 tax year, the amount of income exempted from the AMT will rise to $70,950 for joint filers; $46,700 for single filers.
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