Key provisions of Obama's economic stimulus package

The bill that President Obama signed into law on Feb. 17 contains a number of important provisions that pertain to our personal finances.

Regarding tax relief, a ton of Americans will benefit. For example, all working folks will qualify for a tax credit of up to $400 for single filers and up to $800 for married persons filing jointly, provided that singles earn less than $75,000 annually, and married persons less than $150,000.

There are no credits for dependents. Most retired individuals will receive a one-time, $250 payment. And, for those of us who face the Alternative Minimum Tax issue every year, this law provides another one-year fix to protect millions from having to pay AMT.

The law contains many targeted tax incentives for consumers. First-time home buyers who purchase a new or existing home this year can be eligible for up to $8,000 in tax credits. The phase-out for higher wage earners is the same $75,000 and $150,000. If you purchase a new car, light truck, motor home or motorcycle this year costing up to $49,500, you can now receive a tax deduction for any state sales taxes you pay on your purchase. Phase-outs begin at $125,000 for singles and $250,000 for married persons.

A new tax credit modifies the Hope Scholarship Credit and offers a tax credit of up to $2,500 (100 percent of the first $2,000 and 25 percent of the next $2,000) for college expenses. The phase-outs begin at $80,000 for singles and $160,000 for married persons. The maximum award for Pell Grants has been raised to $5,350 for undergraduates in 2009 and 2010.

If one is unemployed, the Feds have provided for up to 33 additional weeks of unemployment compensation for those who have exhausted their benefits. Also, an extra $25 has been added to each weekly benefit, and there will be no federal income tax on the first $2,400 of unemployment compensation collected in 2009. Moreover, the Feds have provided a 65 percent subsidy for COBRA health benefits for up to nine months for persons who are laid off their jobs in the period from Sept. 1, 2008, and Dec. 31, 2009.

Small businesses also benefit under the new law. It provides a continuation of the ability to take first-year depreciation of 50 percent of the cost of an asset placed in service in 2009. Maximum expensing limits will remain at $250,000, as they were in 2008. The new law added a 75 percent exclusion on capital gains taxes for persons who sell qualified small business stock that has been held for more than five years.

The stock must have been acquired at original issue after Feb. 16, 2009, and before January 1, 2011.

If you have put money in a 529 plan, any dollars you remove in 2009 and 2010 that will be used for a computer purchase, Internet access costs, as well as software purchases are now considered qualified higher education expenses. The kicker is that these expenses must be incurred while the student is in school, and the software must be educational.

Got a financial planning question for Greg? You may e-mail him at greg29803@gmail.com.

Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.