No check this year, but a lot of tax credits

John W. Schoen Senior producer • Profile • E-mail

With the economy and the stock market on a continuing slide, readers are looking for relief. One wants to know when his stimulus check is coming, while another is wondering what to do with his 401(k). And a lot of readers say they wish we’d just stop writing about bad news.

Will the working people get a stimulus check with Obama like we did with Bush?
— Kenny, Macon, Miss.

Yes and no.

The latest, $787 billion economic stimulus package President Obama signed last month includes about $287 billion in tax cuts, if you believe the calculations Congress came up with. (It’s always hard to know exactly how the numbers will shake out).  

But instead of mailing out a check for up to $600 per person and $1,200 for couples, as the Bush administration did, Congress and the White House decided to take a different approach. One big reason is that the evidence suggests that a lot of people didn’t spend the money but stashed it in savings or used it to pay off credit cards. There’s nothing wrong with that, but it’s not the fastest way to get the money flowing through the economy.

Instead, the new tax cuts are going to a variety of different people in various circumstances, or to those who buy or invest in certain things the government wants them to. That means some people will get checks mailed to them; others may see a bigger tax refund check, still others will get a break on their taxes.

For example, if you make less than $75,000 ($150,000 for couples), you’ll get a “refundable” tax credit of 6.2 percent of earned income, up to $400 per individual and $800 for couples in 2009 and 2010. If you owe taxes, you’ll get that amount taken off your tax bill. If you owe no taxes, the government pays the you credit. That’s why it’s called a “refundable” credit. (Note: Thanks to readers for pointing out that, for many wage earners, this will be spread out and show up as less withholding from your paycheck.)

If you collect Social Security, you’ll get a check for $250. The same goes for railroad retirees and veterans getting VA benefits. If you’re a state government retiree who is not eligible for Social Security, you also get a $250 check.

The plan lowers the floor on income to give more poor families access to the $1,000 child tax credit. If you make less than $3,000, the credit is refundable (you get a check).

Parents of college students get a $2,500 tax credit for tuition and other expenses if they make less than $80,000 (or double that for couples), but it’s not refundable.

If you buy your first home between Jan. 1 and Dec. 1, 2009, and make less than $75,000 (double for couples), you can get an $8,000 tax credit — also refundable.

The plan also includes tax goodies for people who save energy two ways. You get a tax credit (not refundable) if you fix up your home to make it more energy-efficient. And you get a non-refundable tax credit of $2,500 if you buy a "plug-in" electric car for at least $2,500 (the bigger the battery, the bigger the credit).

Small business owners also catch some breaks in the plan. If your company’s sales are less that $15 million a year, you get to write off losses in 2008 against five previous tax years. So if you paid taxes on those profits, you can subtract this years losses and get a refund on the taxes you paid on those profits. You can also write off to cost of buying new computers and other equipment more quickly.

And taxpayers will also get relief from the monstrous Alternative Minimum Tax — enacted decades ago to snare “rich” people that threatened to attack 24 million middle-class taxpayers in 2009. You’ll save that money when you pay your 2009 taxes. But the tax is so mind-numbingly complex, your accountant probably would be hard pressed to tell you how much you saved.

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