How will this affect you? Take note of the proposed change to the $7500 first-time homebuyer credit!
A payroll tax credit and breaks for business are among the tax cuts Congress will pass as part of the big economic stimulus package coming soon.
The new Congress will hit the ground running on tax cuts. House taxwriters have already approved a big package to help jump-start the economy and get extra money into taxpayers’ wallets, and the Senate will follow soon, with the goal of getting a bill to President Obama’s desk by mid-February.
The House tax bill is a good blueprint for what will eventually pass because it contains a number of Obama’s campaign promises on taxes, such as a payroll tax credit for individuals. The House’s proposed credit would equal 6.2% of earned income in 2009 and 2010, capped at $500 for single filers and $1,000 for joint filers each year. It would be phased out for higher-incomers — between $75,000 and $100,000 of adjusted gross income for single filers and between $150,000 and $200,000 for married couples.
Taxpayers won’t have to wait until they file their 2009 returns to get the credit. Congress will probably instruct the IRS to adjust withholding tables so that the tax relief will show up in paychecks later this year. What if you’re self-employed? Most likely, you’ll get a choice: either claim the credit on your return or reduce your estimated tax payments.
Early indications are that the Senate’s proposals will dovetail with the House measure. For example, Senate tax leaders have a plan that includes a nearly identical payroll tax credit. Theirs comes with a twist, though: To make up for not receiving the payroll tax credit, retirees would get a onetime payment of $300. The House will probably go along with this to avoid alienating a key voting group.