The Economic Stimulus has passed and I've had some time to review what's in the bill for taxpayers. In short, there are not many tax changes in the bill. The highlights:
- Rather then sending out a large rebate check as has been done in the past this bill will instead pass out the savings by reducing the amount withheld from your payroll taxes. Most taxpayers can expect to see $400 dollars in savings over the course of year.
- If you buy a vehicle anytime between now and the end of the year you will be able to deduct the sales tax on your 1040. Unfortunately, I bought my new car on January 1st and therefore do not qualify.
- If you are a first time home buyer OR if you have not bought a home in 3 years you are eligible for a $8,000 credit on your taxes should you buy a home in 2009.
As always, there are income limits on these deductions. If you are a single person making $75,000 or a married couple making $150,000 it is likely these deductions will not apply to you.
The only tax policy that I see that could potentially be stimulative is the credit for buying a home. That said, the lower interest rates we are seeing and home prices being reasonable should be enough to increase demand. I'm not sure people will rush out to buy a car simply to save $500 on their taxes and I don't know that an extra $8 or so per week in payroll tax relief will alter anyone's spending habits.
The big fight starts soon as Bush's tax cuts start to expire after this year. If they are not extended we are looking at tax hikes next year.
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