The Asian Conservative

President Obama just signed the stimulus plan for 2009. Here are a few Tax Provisions from the Stimulus package that I personally like. These are excerpts from a CSPAN PDF Document “Tax Provisions” These are the main things that interested me in the 19 page document. There are lots of little things in there for small business, infrastructure and so forth but these are the points that I think will help me the most.

“American Opportunity” Education Tax Credit. The bill would provide financial assistance
for individuals seeking a college education. For 2009 and 2010, the bill would provide taxpayers
with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related
expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax
credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses
(including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000
of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit
would be refundable. This tax credit will be subject to a phase-out for taxpayers with adjusted
gross income in excess of $80,000 ($160,000 for married couples filing jointly). This proposal is
estimated to cost $13.907 billion over 10 years.

I really wish they could figure out a way to take into account cost of living adjustments for gross income limits. For people living in large Metro areas where the cost-of-living is very high (San Francisco Bay Area, Southern California, New York, etc.) These maximum income requirements seem low. A single person who earns $80,000 in San Francisco doesn’t make that much money in real money that can be set aside for paying for a house, college, or other expense.

Computers as Qualified Education Expenses in 529 Education Plans. Section 529 Education
Plans are tax-advantaged savings plans that cover all qualified education expenses, including:
tuition, room & board, mandatory fees and books. The bill provides that computers and
computer technology qualify as qualified education expenses. This proposal is estimated to cost
$6 million over 10 years.

Yes! Computers for kids. The more kids that have computers the better

Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a
refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the
purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes
purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit
are currently required to repay any amount received under this provision back to the government
over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out
for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint
return). The bill eliminates the repayment obligation for taxpayers that purchase homes after
January 1, 2009, increases the maximum value of the credit to $8,000, and removes the
prohibition on financing by mortgage revenue bonds, and extends the availability of the credit
for homes purchased before December 1, 2009. The provision would retain the credit recapture
if the house is sold within three years of purchase. This proposal is estimated to cost $6.638
billion over 10 years.

Sweet. I’ve been looking into buying a condo, $8,000 of tax credit sweetens the deal. Interesting.

Recovery Zone Bonds. The bill would create a new category of tax credit bonds for investment
in economic recovery zones. The bill would authorize $10 billion in recovery zone economic
development bonds and $15 billion in recovery zone facility bonds. These bonds could be issued
during 2009 and 2010. Each state would receive a share of the national allocation based on that
state’s job losses in 2008 as a percentage of national job losses in 2008 (each state will receive a
minimum allocation of these bonds). These allocations would be sub-allocated to local
municipalities. Municipalities receiving an allocation of these bonds would be permitted to use
these bonds to invest in infrastructure, job training, education, and economic development in
areas within the boundaries of the State, city or county (as the case may be) that has significant
poverty, unemployment or home foreclosures. This proposal is estimated to cost $5.371 billion
over 10 years.

I wonder if this applies to my home state of Michigan. Michiganensians are down on their luck these days so hopefully an infusion will help.

Premium Subsidies for COBRA Continuation Coverage for Unemployed Workers.
Recession-related job loss threatens health coverage for many families. To help people maintain
coverage, the bill provides a 65% subsidy for COBRA continuation premiums for up to 9 months
for workers who have been involuntarily terminated, and for their families. This subsidy also
applies to health care continuation coverage if required by states for small employers. With
COBRA premiums averaging more than $1000 a month, this assistance is vitally important. To
qualify for premium assistance, a worker must be involuntarily terminated between September 1,
2008 and December 31, 2009. The subsidy would terminate upon offer of any new employer-
sponsored health care coverage or Medicare eligibility. Workers who were involuntarily
terminated between September 1, 2008 and enactment, but failed to initially elect COBRA
because it was unaffordable, would be given an additional 60 days to elect COBRA and receive
the subsidy. To ensure that this assistance is targeted at workers who are most in need,
participants must attest that their same year income will not exceed $125,000 for individuals and
$250,000 for families. The Joint Committee on Taxation estimates that this provision would
help 7 million people maintain their health insurance by providing a vital bridge for workers who
have been forced out of their jobs in this recession. This provision is estimated to cost $24.7
billion.

I have a sneaking suspicion that I’m going to get laid off this year so if COBRA is cheaper yes I will get it. It sure beats trying to find private individual insurance.

jeff Uncategorized