How Does the 2009 Stimulus Affect Your Taxes?

How Does the 2009 Stimulus Affect Your Taxes?

The stimulus package of 2009 offers a “tax break” for couples ($1000) and for singles ($500). What does that average to you? Well, first we have to define “tax break” in order to resolve the confusion.

One definition informs us that a “tax break” is a tax assistance, deduction that is granted in order to stimulus a certain commercial activity. Wikipedia defines a “tax break” as a tax savings that includes exemption, deduction, or credit

The promised “tax break’ is on payroll taxes, which makes it already a bit more confusing. Payroll taxes are the amount of taxes your employer deducts from your paycheck every pay period. The employer pays some of these taxes, but most are your income taxes held in trust by your employer, and handed over to the Internal Revenue Service. The amount withheld from your paycheck is used against your income tax at the end of the year in order to determine if you owe the Internal Revenue Service, or if the Internal Revenue Service owes you. The hypothesizedv deduction is a deduction of your payroll tax.

Employers have mostly agreed to reduce the amount of payroll taxes taken out of your income every pay period by a sum that will total $500 for singles and $1000 for couples.

Part of the stimulus plan was also the first time home-buyer’s deduction, which could save you up to $8000 on the buy of a new home if you have not owned a home in the past three years.

Don’t count on getting the complete $8000. Under the tax credit, you will get $8000 as a maximum. If 10% of the total cost of your home is less than $8000, you will receive that amount as opposed to $8000. If you are single and earn $75,000 a year or more, you will get less than $8000, and if you are married and earning $150,000 in combined annual income or more, you will get less than $8000 back in addition.

This is a refundable credit, meaning that if you owe the federal government nothing or less than $8000 at tax time, the complete refund of $8000 is refundable to you less what you owe. So, if your total tax liability by April 15, 2010 is $2000, you will get $6000 back if you used the first time home-buyers tax credit for 2009.

This “tax break” was intended to stimulus commercial activity in the real estate industry.

It is recommended that you consider consulting with a tax specialized and have them file your return. Filing an income tax return can ordinarily be a bit confusing, but due to all the tax changes resultant of the recession, your next filing could prove more difficult than ever. Tax professionals are trained on all the changes to the code and will know which ones will assistance you and exactly how you do or do not qualify to take advantage of them.

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