Personal Tax Breaks in the 2009 Economic Stimulus Plan

by Ryan Guina

The details of the 2009 economic stimulus recovery plan have been released, and even though they aren’t quite official, it looks like the economic stimulus plan should pass in this format, or something very similar. The final tally is roughly $798 billion, a hefty sum by any standard.

Here is a breakdown of how the new stimulus plan may affect your 2009 tax status:

Personal Tax Breaks in the 2009 Economic Stimulus Plan

The stimulus bill may put more money directly into your pocket, depending on your current situation and income level:

Making Work Pay tax credit

$400 – $800 payroll tax credit. The new stimulus bill calls for a payroll tax credit of $400 for low and middle-income workers and $800 for couples. A full credit will be given to individuals making $75,000 or less, or $150,000 or less for couples. Partial credits will be given up to $100,000 for individuals or $200,000 for couples.

No stimulus check this year. It is important to note that this is not a stimulus check like last year – individuals who qualify for the payroll tax credit will have fewer taxes withheld from their paycheck and will receive an additional $15 or so per check (assuming 26 pay periods per year). Update: The tax credit will begin April 1, 2009, so the weekly addition to your paycheck should be around $11. More information about how to make these small tax credits work for you.

Additional personal tax breaks in the 2009 stimulus plan

One-time $250 payment to people who don’t work. This $250 one-time payment will be sent out to retirees, people on disability and others who don’t work.

Alternative Minimum Tax (AMT) relief. The economic recovery bill calls for a higher exemption limit on the AMT. This should equate to an average tax savings of $503 on taxable income levels between $66,354 and $111,645.

Tax provisions for home buyers and car buyers in the 2009 stimulus plan

The government wants you to spend money to keep our economy going. Here are some tax benefits your may be eligible for:

$8000 first time home-buyers credit

There was previously a $7,500 credit which had to be repaid and was set to expire on July 31, 2009. The new stimulus bill changes the $7,500 first time home-buyers credit to an $8,000 tax credit that does not have to be repaid. To qualify for the $8,000 first time home-buyers credit, one needs to purchase their first home between January 1, 2009, and December 1, 2009.

New car buyer’s tax credit

To say the auto industry is hurting would be an understatement. The US government wants to prop up the auto industry and to do that they are offering consumers the opportunity to deduct state and local sales taxes and excise taxes from a new car purchase made in 2009.

Eligible vehicles will include new cars, motorcycles, light vehicles, and RV’s. There are income limitations involved: the deduction will only be available to individuals earning less than $125,000 or $250,000 for joint filers. The added benefit of this deduction is that you don’t have to itemize your taxes to take advantage of this tax write-off.

The new economic stimulus plan is more than just personal tax breaks

The 2009 economic stimulus recovery plan will affect people in may ways, not just their personal taxes. Also included will be provisions for those collecting unemployment and COBRA benefits, people receiving personal support such as food stamps or welfare, increased educational tax credits and Pell Grants, and a host of other benefits for states, companies, and certain industries.

Published or updated March 2, 2009.
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{ 33 comments… read them below or add one }

1 frugalcpa

Thanks for the update, Ryan! That payroll credit is interesting. And I wonder if full-time students are eligible for the $250 credit for people not working.


2 Ryan

No idea. This still hasn’t passed, so all details aren’t available yet. My guess is that if they can be claimed as a dependent, then probably not. But I won’t say that they can claim it if they aren’t a dependent. I guess we’ll see when they post the final version of the bill. 🙂


3 outlaw

Oh boy an extra 15-25 dollars a paycheck. that is going to make such a huge difference. I am so glad we mortgaged our children’s future for this.


4 Kristy @ Master Your Card

I agree with outlaw here. I’d rather they keep that money on the payroll tax and not put us in further debt. What I’d like to see is a specific breakdown from the Obama administration on how they came to the conclusion that this package was going to be beneficial to the economy. What indicators lead them to believe that an additional $15-25 per paycheck would stimulate the economy. What statistics prove that $250 arbitrarily given to those not working will go into the economy – I’m inclined to believe a good portion of them will stick that in savings as most of us did with the last economic stimulus check. It seems to me that this bill may be better received if the why of it were explained. As it stands, I see a lot of pork that doesn’t promise to do any more than the last package did.


5 p1ssed

This “stimulus” bill was nothing more than exploiting a bad economy. It is in no way a “stimulus”. They are doing the minimum to disguise it as such, but the real purpose of this bill was to get all the pork through.


6 Imani

I agree with what outlaw and Kristy said. Wondering how congress came up with $250 for retired folks, of which, I am one…retired Fed.

And as Kristy said, I will sock that money away in the bank just as I did with the money Bush sent out last year.

For those who have the inclination, is up and running now. The bill is there to study and there is an opportunity to express our views.


7 Paul

I would like to know if this $15-25 dollars that appears on our checks is being borrowed against our tax return next year? Are the tax brackets going to reflect this money when filling in 2010 so we don’t have to pay this money back?

If they don’t adjust the tax brackets then you might have someone who normally has a return of let’s say $200. Is this person going to have to end up paying $200 in taxes?

Would this extra money put some people in a higher tax bracket and they’d end up paying more taxes.

Anyone have any answers to these questions?


8 Ryan

Paul: My understanding is that it is a tax credit, which means if you qualify for it, it does not get paid back. It won’t be considered taxable income, so you won’t need to worry about it putting you into another tax bracket.


9 Denise

I really don’t see how this is going to help me or my other co-workers. It was announced Thursday we are getting a 10% reduction on our salary. I too am curious as to where the money is coming from. If our employers are having to foot the bill then they will find other ways (10% reduction) to cover the expense.


10 Ryan

Denise: Sorry to hear that you are receiving a reduction in salary. It is better than losing a job, of course, but it is still difficult to deal with.

Employers are not actually footing the bill for this – they are simply withholding fewer taxes to send to the IRS. Most companies take care of your tax withholding for you and send the money to the IRS and/or state tax department on your behalf. It makes it easier than you having to send it in yourself. This money is taken directly from your paycheck, and you don’t miss it. With the new stimulus, employers simply withhold fewer dollars.


11 Kristy

Does the first time homeowners credit have to be noted on next year’s tax return, or if it was bought early this year, can it be included in the tax return I’m about to send out to get the credit earlier?


12 Ryan

Kristy: Here is the best info I found on How to Claim the First-Time Homebuyer Tax Credit.

I believe houses purchased in 2009 need to be claimed on 2009 taxes, which will be filed next April. Best of luck to you.


13 Sandy

I already filed my 2008 taxes then bought a house in May. I amended my 2008 to get the $8,000 now. I was afraid the gov’t might run out so I didnt want to wait. You can amend your 2008 or file with 2009. There are other rules that apply: cant own a house in last 3 years, can’t make over a certain amount of money, and a few others you might want to read on the website.


14 Trun



15 Roger

I read an article in the AARP Bulletin this month (March Edition). It states that if your buying a home this year, either for the first time or if you haven’t bought a home in 3 years you’ll get the tax credit for 8k to help with the down payment. I happen to be in a situation where my parents have put their house in my name 4 years ago, but they will remain living there. I am now buying a house for myself, primary residence, and would like to get the 8k tax credit. Everything I read says first time buyer only, except this AARP article. Technically this will be my first time buying a house. What are your thoughts regarding my eligibility for this tax credit.


16 Maria


It is worse than you think. What Obama DID NOT tell people, is that YOU WILL have to claim it on next years returns. I found that info on the IRS website.

So,if you get 13/week which I believe is the max, only spend 7.50 or so, because you are not getting it free and clear.


My understanding is that you need to be a first time buyer not just if you haven’t bought a home for 3 years. The 3 years thing means, this first time home that you buy, you need to KEEP it and not sell it for AT LEAST 3 years. Otherwise, you’d have to claim that 8k as income. If you do keep it for 3 years, you don’t have to claim it.

As far as your parents house, I think you are going to be out of look. “first time buyer” means, that your name is NOT ON ANY other title for a home.

I am in the R.Estate business, so we have been following this stuff very closely.

Just another “loophole” in Obama’s plan….that he is not telling people.


17 Maria

Thanks for the answer, Ryan. But, I don’t know about a check at the end of the year. I heard, people who don’t work will get a “check” now. The whole point to Obama’s madness is that he wants people to “spend” it now. Sadly, I don’t make enough (I’m in Real Estate and probably not the most sought after job now), to even do any quarterly papework. My tax guy said it wasn’t worth it, so I take care of all of it at the end of the year.

I thought, maybe my husband will get “it all” in his paycheck since we file jointly.


18 savannah espinoza

hey everyone!! i am very new to the work force and have heard so much about this stimulus that will be effecting the amount of paychecks. i need to know more information about this. if anyone can help me by sending me a link or just educating me i would really appriciate it. thanks =0)


19 Ryan

Savannah, try this: Making Work Pay credit.


20 Vern Christopher

I am retired and on Social Security (small amount — less than $400/mo). Still, I’m glad I’m not working! What a sham! I have not received my economic stimulus of $250 as of April, 2009! It is supposed to be paid in my Social Security Automatic Bank Deposit! It was not!

Why can the this Administration give away Hundreds of Millons and Billions of Dollars to Banks, Insurance Companies and the Auto Industry with no basic accounting of the monies they received, and the citizens of this country get basically nothing?

Something is very definitely WRONG with this stimulus package!


21 Maria

Vern, I so agree with you! We, the American consumers are the BEST ones to stimulate the economy. But, this few bucks in my husbands paycheck is not even noticed. It goes towards what I would already buy such as milk and toilet paper!
I don’t know how you can live on what you get from S.S.???? I feel terrible for you!

Here’s what we should remember: We can’t do anything about Obama now. I respect the tea parties, but honestly, does anyone think the Obama Admin really cares? No.

So, what we have to work on is the future. Let’s make sure Obama does not get re-elected. We have 3-1/2 years to work on this! Let’s get someone else in there, can you imagine…..look at all the damage he has done in 3 months. Can you imagine 8 YEARS?
I think all the promises he has already broken, already changed minds of people who voted for him. They say they wish they hadn’t. But, those are mostly the independents I know and hear of. We need to work on the “die hard” Obama supporters. The ones who can’t even say “why” they support. him. Must be his glowing smile.


22 Concerned Citizen

I understand that people who pay taxes during the year are seeing $11 more on their paychecks, but what is in the stimulus package for people who are self-employed and get whaled with taxes once a year?????


23 concerned taxpayer

Ok, so if we get the stimulus of $11 more on our paychecks. What happens when we file taxes for 2009? Are we going to have to pay that back then? I don’t think it is a stimulus if you have to pay for it. Besides that whopping $11 will not even fill up my car. So I think I am going to stick with the old tax tables and continue with the deductions I originally had. I can’t afford to have to pay the IRS $xxxx after a whopping $352 of money back in my pocket ($44×8 mo). Who can? I don’t know anybody who can manage that drastic a change in their budget, except for the government who is playing roulette with ours.


24 Diane

I just got paid since we get paid once a month. No extra money in my check… I make under the limit amount. Our payroll company is telling us it is because we get paid monthly. I don’t think I shouldn’t get it just because my company decided to pay us once a month. Can I get this money at the end of the year?


25 Josh

I agree an extra $11 in my paycheck is not going to do much. It can’t affect tax brackets or any money owed at the end of the year. Your gross earnings are your gross earnings and this is what your bracket is based off of. I don’t agree with taxpayer money used to bailout big business without retrobution. I have a mortgage through a bailed out bank, yet I still have to pay my mortgage when my bank’s debts are forgiven. how does that make sense? Let me reduce my overall mortgage payment and that would cause an increase in my spending on something else.

Personally, I support Obama overall. At least he is trying unlike anything the republicans were doing. His plan is laden with tax credits. I am middle class and do think that those who earn more should pay more. Why should we as a people support a government who was interested only in padding big business pockets like the last regime. Bush could not run a baseball team (Texas Rangers) how the hell did that give him credit for a whole country? McCain was set to do the Bush plan for another 4 years and drive us down even further.

The economy is not a light switch and anyone who thinks it is needs to go read a book on the stuff. A plan now takes time to develop and prosper. Heck, that market has actually shown growth for the first time in years. The market was being driven downward out of fear of policy set forth by republican govern.

I know I am going to hear it for saying this so I will sit back and read what responses are given.


26 alex

I reallly mad that I have to pay my 7500 back but if I would have waited 2 months I could have got 8K for free.


27 shane

People who have the contractual obligation of $7500 was offered no incentive for their counterparts who held off to purchasing in 2009 for the $8000 nonrepayable?

Is is me or do those people deserve a break?


28 Sherry

Hi Alex. I am with you. I borrowed the 7500 too! I bought my house in November of 2008. I have to pay it back and if i would have bought the house in two months later I would of had 8000 free. Isnt fair..!!!


29 WhoNumber2workd4

I think the 7500 may be included in the three years deal? Not sure? The three years in the house you may not have to pay it back? Its not fair at all. I bought my house and used the credit as well. Why wouldnt they turn ours over the same way the 8000 credit was. No repayment!!!!!


30 Aida

So now the retired enlisted military that has to work in order to make a living because the retired pay is not enough to live on, now has to pay the stimulus money back because we are working. HOW SPECIAL IS THAT!!



I dont get this at all. Last year I got back 1500.00 now this year im only getting 200.00 but the gov wants me to go a buy this an that. Someone explain how Im suspose to do that now?
their saying that I cant get any tax breaks or nothing


32 Maria


Unfortunately, the Obama Admin is full of liars. I do not believe they care as much about people as they do about the government and how to give them even more control. I just heard a very disturbing report on how Obama figures that he walked into the Presidency with 1.3 trillion deficit. He didn’t count that 700B was the tarp money for the banks that Obama URGED Bush to pass and 500 of it got paid back. So, the deficit SHOULD be smaller.

I have never been more disappointed in my Government than I am right now. But, I think that will all turn around in November. Hang in there, Dana.


33 Marj

Since when does the government get anything right?, the answer is NEVER….


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