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What's In The Stimulus Bill

What's In The Stimulus Bill And How Does It Effect You?

The billions of federal dollars distributed in the American Recovery and Reinvestment Act — also known as the stimulus bill — are not just for government agencies.

The federal government has some money for you too.

Hundreds of dollars in tax credits, loans and other programs are being distributed directly to individuals, mostly in the shape of programs administered by the state Mortgage Finance Authority and through tax credits eligible taxpayers can claim on their 2010 and 2011 tax returns.

Following is a list of some of those programs, compiled with information from the Authority, the federal Internal Revenue Service, the federal Social Security Administration and Veterans Affairs Department, and the state and federal labor departments.

Students

The American Opportunity Credit allows students or their families paying for tuition and certain books and class materials to claim a tax credit of up to $2,500 on tax returns filed in 2010 and 2011. It replaces a similar scholarship previously capped at $1,800.

The full credit is available to individuals making $80,000 a year or less and households making up to $160,000.

The bill also increases the maximum Pell Grant award by $500, to $5,350 in 2009 and $5,500 in 2010.

Drivers

Consumers who buy new cars, light trucks, motor homes and motorcycles between Feb. 17, 2009, and Dec. 31, 2009, can deduct any state, local and excise taxes paid on their vehicle from their 2010 tax returns.

The maximum deduction is $49,500, and is only available to households making less than $260,000 a year and individuals making less than $135,000.

Homebuyers

• First-time Homebuyer

Assistance

Individuals and families who buy their first home between Jan. 1, 2009, and Dec. 1, 2009, can receive a federal tax credit for 10 percent of the home’s purchase price, up to $8,000.

First-time homebuyers — defined as those who have not owned a home the past three years — can apply the credit to their 2010 tax return next spring, or file an amended 2009 return to receive the credit sooner. Those who owe less than $8,000 in taxes this year will receive the balance of their credit as a cash refund on their 2010 return.

Credit recipients must commit to living in the home for three years.

Individual homebuyers making up to $75,000 a year and households making up to $150,000 are eligible for the full credit. Those with higher incomes may be eligible for a smaller credit.

This program replaces and expands an existing first-time homebuyer credit that was set to expire July 1. Individuals who bought their first home before Dec. 31, 2008, may still qualify for a credit of up to $7,500 under the previous program.

Eligible homebuyers should contact their mortgage lender to claim their credit, state Mortgage Finance Authority spokeswoman Leann Holt said. Additional information is available at www.federalhousingtaxcredit.com.

• Tax Credit Loan Program

Working with participating lenders, the Authority gives eligible first-time homebuyers a zero-interest loan to cover down payments and closing costs. Loan recipients should apply for the federal first-time homebuyer tax credit and use that to pay off the loan, Hold said.

Homebuyers who repay the loan by June 30, 2010, will pay no interest. Loans unpaid by that date will turn into a 30-year, fixed-rate second mortgage that requires monthly payments. This loan can be paired with Authority-sponsored 30-year, fixed-rate mortgages for first-time buyers, Holt said.

Eligibility for the loan is limited by household income, family size, location and the price of the home. Details are available at http://www.housingnm.org/federal-tax-credit. For a list of eligible lenders, visit www.housingnm.org/find-participating-lender.

Homeowners and Renters

• Weatherization

The stimulus bill expanded the Authority’s low-income weatherization program from $5 million a year to $26.8 million this year.

The program provides up to $6,500 of weatherization services on homes with a salary at or below 200 percent of the federal poverty level. That translates to about $30,000 for a family of two and about $44,000 for a family of four.

An inspector will audit the homes of eligible renters or homeowners for safety and energy efficiency, then retrofit the home to improve efficiency. Typical weatherization work includes installing insulation, replacing broken windows, tuning up heaters and furnaces and installing energy-efficient bulbs and refrigerators.

• Energy Efficiency

Owners who install fixtures like insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems in their homes may claim a tax credit for 30 percent of the cost, up to $1,500.

Owners can also claim a tax credit for 30 percent of the full cost of solar panels and solar thermal heaters.

• Homelessness Prevention

The Authority plans to distribute $6.78 million through non-profits statewide to help families and individuals on the verge of becoming homeless.

Aid available once the program is off the ground may include help with housing searches, legal services, credit repair, short-and-medium-term rent and utility payments, security and utility deposits, moving costs, hotel vouchers and up to six months of rental and utility arrears.

The Authority is currently accepting proposals from non-profit companies that will run this program, and planned to award contracts by mid-June. The program is expected to be off the ground by Sept. 30, Holt said. For more information, visit http://tinyurl.com/nmhomeless after that date.

• Home Refinancing Help

The Making Home Affordable programs offer help to those on the brink of foreclosure.

Homeowners in immediate danger of foreclosure may qualify to reduce their monthly payments to no more than 31 percent of their pre-tax income.

The home refinance program lets “underwater” homeowners — those making payments on a mortgage larger than their home is worth — or with adjustable-rate mortgages may be eligible to refinance to a 15-or-30-year, fixed rate mortgage. A good payment history is required. The program is available until June 30, 2010.

• Earned Income and Child Tax Credits

The earned income tax credit will increase in 2009 and 2010 to $5,657 for families who have three or more children and earn $45,295 or less.

In 2008, only families making $8,500 or more could claim a separate $1,000-per-child tax credit. The stimulus bill expands that benefit to families with salaries starting at $3,000 in 2009 and 2010. It is a refundable credit, which means taxpayers who owe less in taxes than the credit would give them can receive a tax refund for the difference.

Both can be claimed on tax returns filed in 2010 and 2011.

Workers

The Making Work Pay tax credit will distribute $400 to workers, in most cases by decreasing taxes withheld from their paychecks. Individuals can expect to see their paycheck deductions decrease by about $8 a week, according to the IRS.

Unemployed, Retired and Disabled

• The bill expanded eligibility for unemployment benefits, but recipients here will see few changes because New Mexico was one of five states that made those same changes years before the bill was passed, Department spokeswoman Carrie Moritomo said. New Mexico did receive $39 million in the bill to keep those benefits going, she said.

Nonetheless, unemployment recipients will get a small boost this year, according to the IRS. Normally, all unemployment benefits are taxable. In 2009 however, the first $2,400 in benefits doled out to each recipient will be non-taxable.

• The federal government will subsidize premiums for COBRA — a program that extends health insurance benefits for the unemployed — for those who lost or lose their jobs between Sept. 1, 2008, and Dec. 31, 2009. This program will subsidize COBRA premiums by 65 percent for up to nine months for eligible participants.

• Retirees, disabled individuals and other Social Security recipients, as well as veterans receiving benefits from the federal Veterans Affairs Department, are eligible for a $250, one-time payment in 2009.

The Social Security Administration issued its payments in May. Social Security recipients who did not receive their payment by June 4 should call the Administration at 1-800-772-1213. Veterans Affairs began making its payments this month through the Administration and the federal Treasury Department.

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