Stimulus pays a few more dollars at payday |
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4. Some limits
One thing is the same as with the earlier stimulus payouts: The
credit phases out for higher-income workers. The full Making Work
Pay credit is available to individuals earning $75,000 or less,
or a married working couple making $150,000 or less. Taxpayers won't
be eligible for any credit once their adjusted gross income hits
$95,000 for single filers, or $190,000 for jointly filing couples.
In addition, nonresident aliens and folks who can be claimed as a dependent on another taxpayer's return are not eligible for the credit.
5. No paycheck, no problem
What if you don't get a paycheck? You still might be eligible for a $250 credit.
The new law says that amount will go to individuals receiving certain Social Security, Supplemental Security Income, Railroad Retirement benefits and veterans' benefits. This money will be sent out as a separate check.
The logistics for distributing the $250 payments have not yet been announced. The assumption, however, is that the IRS will follow a plan similar to the 2008 stimulus payments.
Many retirees work part-time to supplement their government
benefits. In these cases, older workers will not get both the full
$400 Making Work Pay credit and the $250 payment. Any payments received
for Social Security or similar benefits will reduce the payroll
credit amounts a worker gets, tax analyst Luscombe says.
Self-employed workers are on their own. "There is
not an automatic methodology for reflecting this credit," Schwartz
says. "If you feel you're eligible for it, you might want to take
it into account in determining what your quarterly estimated tax
payments should be." Otherwise, you can claim the amount when you
file your return next year.
6. AMT also covered
The new law also makes a temporary adjustment to the income levels
at which the alternative minimum tax kicks in. This costly parallel
tax has ensnared many middle-income filers primarily because those
earning amounts do not automatically increase each year to reflect
inflation.
Under the new law, the AMT income exemption level
increases to $46,700 for single filers and $70,950 for couples who
file jointly.
"Congress has been applying a one-year patch every year for several years now, usually late in the year," Luscombe says. "Like previous legislation, this provides a little bump designed to continue the status quo. If you were in the AMT before, you probably still will be. If you weren't, then you probably won't be in 2009."
Luscombe says the AMT provision isn't likely to have much effect on the overall economy, but it will lessen uncertainty and help people plan their tax moves earlier in the year.
7. More credit for your children
Some parents will get extra credit for their kids via a more generous refundable portion of the child tax credit, also known as the "additional" child tax credit.
With the child tax credit, parents can claim $1,000 per child. But if their tax bill is less than $1,000, the credit can only be used to offset the amount owed. Some parents can recoup the excess credit even if they owe no taxes by claiming the additional child tax credit portion. The exact credit amount is based on 15 percent of income above the threshold amount.
Under the economic-stimulus package, the earnings threshold to qualify for the child tax credit falls to $3,000 in 2009 and 2010 from the 2008 level of $8,500.
"If these changes are figured into withholding, taxpayers will have a few extra dollars in every paycheck, which they presumably will spend," Luscombe says.
8. Breaks for lower-income workers
The law also tweaks the earned income tax credit, or EITC, expanding this tax break for lower- and middle-income workers for the 2009 and 2010 tax years.
The income range in which the credit is phased out has been increased, meaning these workers will be able to keep more of the credit even if their incomes increase. Eligible families with three or more children also will see an increase in their payments, collecting as much as $629 more in 2009.
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