Millions of Americans Will See Tax Cuts This Year

Posted on by Karina

On this Tax Day, less than three months after President Obama's inauguration, Democrats in Congress have taken key steps toward fulfilling his promise to restore balance to our tax code so that middle–income families pay less in taxes and the wealthiest pay their fair share–after years of getting so many tax breaks. This will strengthen the middle class and help to put our economy back on track.

Speaker Pelosi on Tax Day:

Millions of Americans will see their taxes cut this year thanks to the economic plan of the New Direction Congress and President Obama. We enacted the fastest tax cut in history–the Making Work Pay Tax Credit–that workers are already seeing in their paychecks. To spur economic growth and lay a foundation for stronger economy, the recovery plan includes tax incentives for new, job-creating investments by American businesses and the American Opportunity College Tax Credit to help millions of students afford college.

The House-passed budget provides an additional $1.5 trillion in tax cuts for the middle class, protects middle-class families from the Alternative Minimum Tax, and provides incentives to small business to create jobs.

Congress and President Obama are committed to a fairer tax code that helps working families and small businesses and encourage job creation, all within the framework of a fiscally responsible budget that will cut the deficit by two-thirds in five years.

The American Recovery and Reinvestment Act signed into law on February 17th includes the Making Work Pay tax credit for about 95 percent of American workers — one of the fastest, broadest tax cuts in American history already showing up in paychecks. To spur economic growth, it contains tax incentives for new, job-creating investments by businesses large and small, which will transform our economy for years to come, in areas such as renewable energy and energy efficiency. These tax cuts are the largest individual component of the plan, and will help get our economy moving forward. Learn more about the Making Work Pay tax relief on>>

More on the tax cuts in the American Recovery and Reinvestment Act:

Tax Cuts for American Families ($232 billion over 10 years)

Making Work Pay Tax Cut: Provides immediate and sustained tax relief to about 95 percent of American workers and their families through the Making Work Pay tax credit, a refundable tax credit of up to $400 per worker ($800 per couple filing jointly), phasing out completely at $190,000 for couples filing jointly and $95,000 for single filers.

The credit provides over 110 million working families–about 95%–the tax relief they need right now and is being distributed largely by reducing tax withholding from workers' paychecks beginning April 1st. As President Obama pointed out “[B]y April 1st, a typical family will begin taking home at least $65 more every month. Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans.” 2/21/09

Child Tax Credit: Cuts taxes for the families of more than 16 million children through an expansion of the child tax credit. This would provide a new tax cut for more than 6 million children, and increase the existing credit for more than 10 million children.

Earned Income Tax Credit: Expands the Earned Income Tax Credit by providing tax relief to families with three or more children and increasing marriage penalty relief.

American Opportunity College Tax Credit: Helps more than 4 million additional students attend college with a new, $2,500 tax credit for families, which is partially refundable. As a result, the nearly one-fifth of high school seniors who currently receive no tax credit will receive a tax cut to make college affordable for the first time. These tax credits phase out completely at $90,000 for individuals and $180,000 for couples filing jointly.

Alternative Minimum Tax relief: Protects 26 million middle-class families from being hit by the alternative minimum tax.

First-Time Homebuyers: Strengthens the housing market by enhancing the current first-time homebuyer tax credit by increasing it to $8,000 (up from $7,500) and by removing the repayment requirement.

Incentives to Buy New Cars: Provides a tax deduction for state and local sales taxes and excise taxes paid on the purchase of new cars, including light trucks and motor homes.

Business Tax Incentives to Create Jobs ($10 billion over 10 years)

Bonus Depreciation: Helps businesses quickly recover costs of new capital investments by extending the increased bonus depreciation for businesses making investments in new plants and equipment in 2009.

Small Business Expensing: Spurs small business investment by extending small business expensing, doubling the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2009 ($125,000 to $250,000). This write-off phases out completely for investments over $800,000 (up from $500,000).

Buying Back Debt: Provides assistance to companies looking to reduce their debt burdens by delaying the tax on businesses that have discharged indebtedness, which will help these companies strengthen their balance sheets so they can invest in job creation.

Small Business Loss Carrybacks: Increases cash flow for small businesses by providing a 5-year carryback of net operating losses (NOLs). This would allow many small businesses to write off losses incurred in 2008 against taxes assessed over the previous 5 years (current law limits NOL carryback to the previous 2 years), thereby reducing their taxes this spring.

Small Business Investment: Spurs investments in small businesses by cutting the capital gains tax on investors in small businesses who buy stock (in the next two years) and hold it for more than 5 years.

Jobs for Recently Discharged Unemployed Veterans and Disconnected Youth: Creates jobs with business tax credits for hiring recently discharged unemployed veterans who have been out of work or youth who have been out of school for 6 months prior to hire.

Renewable Energy and Energy Efficiency Tax Incentives to Spur Energy Savings and Create Jobs ($20 billion over 10 years)

Tax Credit for Renewable Energy: Extends for three years the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, and waste-to-energy facilities (through 2013).

Easing Credit Crunch for Renewable Energy: Provides grants of up to 30% of the cost of building a new renewable energy facility in 2009 and 2010 in lieu of current law tax credits, or permits facilities to claim a 30% investment tax credit instead of a production tax credit, to address current the credit crunch for investments in renewable energy.

Energy Efficient Home Tax Credits: Promotes energy efficient investments in homes by extending and expanding tax credits through 2010 for investments such as new furnaces, energy-efficient windows and doors, or insulation. Increases the credit from 10 percent to 30 percent of the cost of the investment and raises the credit cap from $500 to $1,500, saving American families money on their energy bills.

Plug-in Hybrid Tax Credit: Spurs the next generation of cars by providing a tax credit of up to $7,500 for families who purchase plug-in hybrid and all-electric vehicles.

Tax Incentives for State and Local Job Creation ($26 billion over 10 years) for critical activities like school construction, low-income housing, and infrastructure development — particularly in area hardest hit by the recession.

This entry was posted in Fiscal Responsibility, Retirement Security. Bookmark the permalink.