April 8, 2010
Tax Cuts are a Key Provision of the Recovery Act
When it comes to the taxman, I'm sure we would all rather be listening to the classic Beatles song of the same name than handing over our hard earned money to the government. Story has it that the song was written to protest all the money the members of the band had to pay in taxes. They eventually reorganized their financial affairs to keep the taxman at bay.
As San Diegans around the region pull out the calculator and organize their receipts from last year, they too will be looking for ways to keep some of their money. Fortunately, the Recovery Act passed last year includes tax cuts that hard-working Americans can take advantage of, and for many it is paying off. With only half of taxpayers having filed thus far, tax refunds are already up nearly 10% from last year – thanks to a broad array of tax cuts in the Recovery Act.
Most people don't realize that tax cuts are the biggest individual piece of the Recovery Act. President Obama and Congress gave 95% of working Americans one of the largest tax cuts in history through the Recovery Act. And as you file your 2009 income taxes, you may qualify for a series of other generous tax cuts – for example, you could save money for attending college, making energy-saving home improvements, purchasing a home for the first time, or buying a new car.
I would hope all San Diegans take advantage of these and other tax cuts as they are filing their 2009 taxes. Here are some of the available benefits:
Middle class tax cut – Ninety-five percent of working families are already receiving the Recovery Act's Making Work Pay tax credit of $400 for individuals earning $75,000 or less and $800 for married couples with an income of $150,000 filing jointly in their 2009 paychecks. This benefit will continue in 2010. In my congressional district, 242,000 families are benefiting from the Making Work Pay tax credit.
Help with college costs – 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.
Homebuyer tax credit – First time homebuyers can get a credit of up to $8,000 for homes purchased by April 30, 2010 under the First Time Homebuyer tax credit. In California, nearly 200,000 households have already taken advantage of this credit.
Tax credit for being energy conscious – Taxpayers are eligible for up to $1,500 in tax credits for making energy-efficient improvements to their homes, such as adding insulation and installing energy efficient windows. Individuals who bought a hybrid car or truck are eligible for a conservation tax credit of between $250 and $1,000. A fuel economy credit of $400 to $2,400 is available depending on the make of a new car.
Vehicle sales tax deduction – 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.
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.
Even though our economy is on the mend, times are still tough for everyone. Many people are still out of work and many of those people are collecting unemployment benefits. Those individuals who received unemployment insurance in 2009 do not have to pay taxes on the first $2,400 of such earnings.
Remember, taxes are due on April 15. Filers can file for free on IRS.gov. The IRS website also lists many more credits for which people might be eligible. By taking advantage of some of these tax cuts, San Diegans will be working for themselves and not the taxman.