President Obama dedicated his weekly address to reminding folks rushing to file their tax returns that a long list of tax credits in last year’s Recovery Act was not a handout – but “targeted relief” that has already put nearly $100 billion “into the pockets of working Americans.”
So far, Americans who have filed their taxes have averaged a refund that is up nearly ten percent this year – to an all-time high of about $3,000, Obama said. The filing deadline is Thursday.
Much of the increase is based on tax breaks – new ones and expansion of existing tax relief – provided by the Recovery Act legislation. It features tax breaks for businesses and those who spent money on energy efficient products or certain home improvements, or those who invested in an electric car or a college education , or purchased a first home or a replacement home under certain conditions.
The Recovery Act has already provided more than $160 billion in relief for families and businesses, with $100 for middle-class working Americans, Obama said.
“No one I’ve met is looking for a handout,” Obama said. “And that’s not what these tax cuts are. Instead, they’re targeted relief to help middle-class families weather the storm, to jumpstart our economy, and to bring the fundamentals of the American Dream – making an honest living, earning an education, owning a home, and raising a family – back within reach for millions of Americans.”
The following is a summary of Recovery Act tax breaks as reprinted from WhiteHouse.gov. The White House has also launched a new interactive Tax Savings Tool available at www.WhiteHouse.gov/Recovery.
Making Work Pay
Ninety-five percent of working families are receiving the Recovery Act’s Making Work Pay tax credit of $400 for an individual or $800 for married couples filing jointly in their paychecks in 2009 – and will continue to in 2010.
- Taxpayers whose withholding in 2009 did not provide the full amount of the credit they are due will get the additional amount when they file their 2009 tax return. Even though most taxpayers received the benefit of this credit in their paychecks from adjusted tax withholding by their employers, they still need to claim this credit on their tax returns (i.e., Form 1040 or 1040A).
Up to $2,500 in College Expenses
Families and students are eligible for up to $2,500 in tax savings under the American Opportunity Credit as well as enhanced benefits under 529 college savings plans, which help families and students pay for college expenses.
- American Opportunity Credit – More parents and students are eligible for a tax credit of up to $2,500 to pay for college expenses and can claim the credit annually for four years instead of two.
- 529 College Savings Plans – Students can now use a 529 plan to pay for computer technology, adding this to the list of traditional college expenses (tuition, books, etc.) that can be paid for by a 529 plan.
Up to $8,000 for Purchase of First Home
Homebuyers can get a credit of up to $8,000 for first homes purchased by April 30, 2010 under the First Time Homebuyer tax credit. Long-time residents who don’t qualify as first-time homebuyers and those with incomes of up to $145,000 for an individual and $245,000 for joint filers are also eligible for a reduced credit.
Up to $1,500 in Energy Efficiency and Renewable Energy Incentives
Taxpayers are eligible for up to $1,500 in tax credits for making some energy-efficiency improvements to their homes such as adding insulation and installing energy efficient windows.
Money Back for New Vehicle Purchases
Taxpayers can deduct the state and local sales taxes they paid for new vehicles purchased from Feb. 17, 2009 through Dec. 31, 2009 under the vehicle sales tax deduction. In states that don’t have a sales tax, some other taxes or fees paid may be deducted.
Expanded Family Tax Credits
Moderate income families with children may be eligible for an increase in the Earned Income Tax Credit and the additional Child Tax Credit.
- Earned Income Tax Credit – The Recovery Act increased the credit for families with three or more children, bringing the maximum amount to $5,657.
- Child Tax Credit – More families will be able to take advantage of the child tax credit under the Recovery Act, which reduced the minimum amount of earned income used to calculate the additional child tax credit to $3,000 from $12,550.
Up to $2,400 in Unemployment Benefits Tax Free in 2009
Unemployment benefits are normally taxable, but the Recovery Act made the first $2,400 of unemployment benefits received in 2009 tax free.
