Fact Sheet: Recovery Act Tax Savings for American Families
Categories: Economy, Office of the Press Secretary, Statements and Releases, Taxes Tags:
Weekly Address: Recovery Act Benefiting American Families During Tax Season
WASHINGTON – In his weekly address, President Barack Obama spoke to the American people about how to take advantage of Recovery Act tax benefits ahead of Tax Day – April 15, 2010. Largely due to the Recovery Act, the average tax refund is up nearly 10 percent this year. One-third of the Recovery Act was made up of tax cuts – tax cuts that have already provided more than $160 billion in relief for families and businesses, and nearly $100 billion of that directly into the pockets of working Americans. To help taxpayers see for themselves exactly how they can benefit from Recovery Act tax credits and collect every dollar owed when they file this tax season, the White House launched a new interactive Tax Savings Tool available at www.WhiteHouse.gov/Recovery.
A fact sheet about the tax benefits in the Recovery Act is below the text.
The full audio of the address is HERE. The video can be viewed online at www.whitehouse.gov.
Remarks of President Barack Obama
Weekly Address
The White House
April 10, 2010
All across America are good, decent folks who meet their obligations each and every day. They work hard. They support their families. They try to make an honest living the best they can. And this weekend, many are sitting down to pay the taxes they owe – not because it’s fun, but because it’s a fundamental responsibility of our citizenship.
But in tough times, when many families are having trouble just making it all work, Tax Day can seem even more daunting. This year, however, many Americans are seeing some welcome relief.
So far, Americans who have filed their taxes have discovered that the average refund is up nearly ten percent this year – to an all-time high of about $3,000. This is due in large part to the Recovery Act. In fact, one-third of the Recovery Act was made up of tax cuts – tax cuts that have already provided more than $160 billion in relief for families and businesses, and nearly $100 billion of that directly into the pockets of working Americans.
No one I’ve met is looking for a handout. And that’s not what these tax cuts are. Instead, they’re targeted relief to help middle class families weather the storm, to jumpstart our economy, and to bring the fundamentals of the American Dream – making an honest living, earning an education, owning a home, and raising a family – back within reach for millions of Americans.
First, because folks who work hard should be able to make a decent living, I kept a promise I made when I campaigned for this office and cut taxes for 95 percent of working Americans. For most Americans, this Making Work Pay tax credit began showing up in your paychecks last April. And it continues this year, for a total of $400 per individual and $800 per couple, per year.
Second, because a college education is critical to the success of our workers and our economy, we’re helping to make it more affordable for millions of Americans. Millions of students and parents paying for college tuition are now eligible for up to $2,500 under the American Opportunity Credit. Along with a host of other steps we’ve taken, this will help us reach our goal of once again having the highest proportion of college graduates in the world by 2020.
Third, we’re restoring the home as a source of stability and an anchor of the American Dream. If you’ve bought a home for the first time, you’re eligible for a credit of up to $8,000. And if you bought a new car last year, you can deduct the state and local sales taxes you paid on that car.
Fourth, whether you bought a home for the first time or you’ve owned one for a long time, if you invested in making your home more energy-efficient with certain improvements like new insulation or windows, or plan to this year, you’re eligible for up to $1,500 in new tax credits. This does more than just put money back in your pocket; it’s helping create new clean energy, manufacturing, and construction jobs at small businesses across the country.
Fifth, to help working families with children through difficult times, we increased the Earned Income Tax Credit and allowed more families to qualify for the Child Tax Credit.
Finally, for those who lost their jobs in the recession and need some help getting back on their feet, we provided a 65 percent tax credit to help cover the cost of health care and made sure the first $2,400 in unemployment benefits is tax-free.
These are among the tax breaks and savings that are available to over one hundred million Americans right now. It’s also important to note that the new health reform law includes the largest middle class tax cut for health care in history, and once it’s implemented; millions of Americans will finally be able to purchase quality, affordable care and the security and peace of mind that comes with it. And one thing we have not done is raise income taxes on families making less than $250,000. That’s another promise we’ve kept.
We’ve also made it easy to find out what’s owed to you and your family. After all, the big guys know how to find their tax breaks; it’s time you did, too. Just visit WhiteHouse.gov and click on the Tax Savings Tool. It’s already been accessed more than 100,000 times by folks who want to see what savings they’re owed and how to collect them. If you’ve already filed your taxes and missed some of the savings available to you, don’t worry – you can still amend your returns after April 15th to save hundreds or even thousands of dollars.
And just as each of us meets our responsibilities as citizens, we expect our businesses and our government to meet theirs in return. That’s why I’ve asked Congress to close some of the biggest tax loopholes exploited by some of our most profitable corporations to avoid paying their fair share – or, in some cases, paying taxes at all. That’s why we’re tightening Washington’s belt by cutting programs that don’t work, contracts that aren’t fair, and spending we don’t need. And that’s why I’ve proposed a freeze on discretionary spending, signed a law that restores the pay-as-you-go principle that helped produce the surpluses of the 1990s, and created a bipartisan, independent commission to help solve our fiscal crisis and close the deficits that have been growing for a decade. Because I refuse to leave our problems to the next generation.
It’s been a tough couple years for America. But the economy is growing again. Companies are beginning to hire again. We are rewarding work and helping more of our people reach for the American Dream again. And while there’s no doubt we still face a long journey together, with more steps to take, more obstacles to overcome, and more challenges to face along the way; if there is one thing of which the people of this great country have convinced me, it’s that the United States of America will recover, stronger than before.
Thanks for listening, and have a great weekend.
RECOVERY ACT TAX RELIEF
Major Tax Benefits
Taxpayers can collect on more than a dozen 2009 Recovery Act tax benefits when they file their 2009 tax returns, including:
Making Work Pay - Ninety-five percent of working families are receiving the Recovery Act’s Making Work Pay tax credit of $400 for an individual or $800 for married couples filing jointly in their paychecks in 2009 – and will continue to in 2010.
Taxpayers whose withholding in 2009 did not provide the full amount of the credit they are due will get the additional amount when they file their 2009 tax return. Even though most taxpayers received the benefit of this credit in their paychecks from adjusted tax withholding by their employers, they still need to claim this credit on their tax returns (i.e., Form 1040 or 1040A).Up to $2,500 in College Expenses – Families and students are eligible for up to $2,500 in tax savings under the American Opportunity Credit as well as enhanced benefits under 529 college savings plans, which help families and students pay for college expenses.
American Opportunity Credit – More parents and students are eligible for a tax credit of up to $2,500 to pay for college expenses and can claim the credit annually for four years instead of two. 529 College Savings Plans – Students can now use a 529 plan to pay for computer technology, adding this to the list of traditional college expenses (tuition, books, etc.) that can be paid for by a 529 plan.Up to $8,000 for Purchase of First Home – Homebuyers can get a credit of up to $8,000 for first homes purchased by April 30, 2010 under the First Time Homebuyer tax credit. Long-time residents who don’t qualify as first-time homebuyers and those with incomes of up to $145,000 for an individual and $245,000 for joint filers are also eligible for a reduced credit.
Up to $1,500 in Energy Efficiency and Renewable Energy Incentives – Taxpayers are eligible for up to $1,500 in tax credits for making some energy-efficiency improvements to their homes such as adding insulation and installing energy efficient windows.
Money Back for New Vehicle Purchases – Taxpayers can deduct the state and local sales taxes they paid for new vehicles purchased from Feb. 17, 2009 through Dec. 31, 2009 under the vehicle sales tax deduction. In states that don't have a sales tax, some other taxes or fees paid may be deducted.
Expanded Family Tax Credits - Moderate income families with children may be eligible for an increase in the Earned Income Tax Credit and the additional Child Tax Credit.
Earned Income Tax Credit – The Recovery Act increased the credit for families with three or more children, bringing the maximum amount to $5,657. Child Tax Credit – More families will be able to take advantage of the child tax credit under the Recovery Act, which reduced the minimum amount of earned income used to calculate the additional child tax credit to $3,000 from $12,550.Up to $2,400 in Unemployment Benefits Tax Free in 2009 – Unemployment benefits are normally taxable, but the Recovery Act made the first $2,400 of unemployment benefits received in 2009 tax free.
Categories: Economy, Office of the Press Secretary, Statements and Releases, Taxes, The President Tags:
Press Briefing by Administration Officials on Recovery Act Tax Credits Available to American Families
BY BRIAN DEESE, NATIONAL ECONOMIC COUNCIL,
MICHAEL MUNDACA, ASSISTANT SECRETARY OF THE TREASURY
FOR TAX POLICY, AND JARED BERNSTEIN, CHIEF ECONOMIST
TO VICE PRESIDENT BIDEN
3:08 P.M. EDT
MR. DEESE: Thanks, everybody, for joining the call. I'm going to briefly just highlight a couple of the new items that the President will be talking about in his radio address this week, and then turn it over to Michael and Jared to go through some of the specifics of the tax provisions in the Recovery Act.
I think you all have a copy of the radio address, but just to highlight some of the new issues: First, the President will be announcing that as of the end of March more than $160 billion in tax relief has been provided to American families and businesses directly as a result of the Recovery Act.
Overall the Recovery Act contained just under $300 billion in tax relief. And so, again, as of the end of March, over $160 billion of that has gone out. And we anticipate that April may likely be one of the largest months that we’ve seen in terms of tax relief -- so that doesn’t include the tax cuts that are going to be going out in this month.
Of that $160 billion, the primary beneficiaries of that tax relief are working families and small businesses. Working families under the Recovery Act have received just about $100 billion in tax relief and they have nearly $100 billion more that is yet to come, again as the result of the Recovery Act tax cuts that Mike Mundaca will go through shortly.
In addition, small businesses have directly benefitted both from provisions that have reduced the cost of investments by allowing them to write off more of those investments upfront, which helps them make investments, create jobs and maintain their business, as well as a reduction in the capital gains rate, a 75 percent reduction in capital gains rate on investments in small businesses, which was an important down payment on one of the President's key priorities, which is eliminating capital gains taxes for investments and small businesses.
So that's the state of play in terms of tax cuts that have gone out. And again, the President will be focusing on that $160 billion total in the Recovery Act.
The second thing the President will be highlighting is that in an effort to make sure that American families know all of the tax benefits that they are eligible for, we’ve launched a new interactive tool on the White House website, which you can see at www.whitehouse.gov/recovery. And the tool is sort of basic and very neat features that just allows you -- anybody who is thinking about going and doing their taxes this weekend to check through and check, you know, have I thought of all of the things that I might be eligible for, have I done the mental calculation right about all of the activities that I might have done over the past year that would have made me eligible for a tax cut. We want to make sure that Americans get all of the tax benefits that they are owed. And so this online tool is an important part of that.
Already -- and the President will announce this tomorrow -- but already over 100,000 people have gone on and utilized the tool on the website. And the President this weekend will encourage more to do so as we head into this last period, this most busy period up until April 15th.
So that's what you're going to be hearing from the President tomorrow in his radio address. And I will now turn it over to Assistant Secretary Mundaca who can walk through some of the specific tax provisions from the Recovery Act.
MR. MUNDACA: Thanks very much, Brian. This is Michael Mundaca, as Brian mentioned. And also as Brian mentioned, what I’m going to do is talk a little bit about some of the major provisions of the Recovery Act that are delivering actually to middle-class families, and then turn it over to Jared who’s going to provide some context for the benefits provided in the Recovery Act.
I’m going to focus on the major tax relief provisions under the Recovery Act -- the Making Work Pay tax credits; the American Opportunity tax credit; the first-time homebuyer credit; some of the incentives for home improvement that improve the energy efficiency of homes, and then touch lightly on some of the others.
The centerpiece of the Recovery Act with respect to tax relief for middle-class families is the Making Work Pay tax credit, which is a refundable tax credit of up to $400 for working individuals and $800 for working families targeted to middle-class families. It phases out over certain income levels, but it’s available in its full form for married couples who make up to $150,000 and, again, starts to fade out after that. So, again, it’s very specifically targeted tax relief for middle-class working families.
The delivery mechanism was through reductions in withholding tax so the money was available immediately and families could have it available over 2009 to spend, but you claim it on your tax return filed this year and get the effect of it on your bottom line taxes paid for 2009 on the return you file in 2010.
So it’s important for taxpayers to know that right now as we roll into the final week of tax filing season we estimate that about 95 percent of working families -- about 110 million Americans -- are eligible for the credit. So, again, very targeted, very broad tax relief for middle-class working families.
The American Opportunity tax credit builds on the already existing Hope tax credit and allows up to $2,500 tax credit with respect to cost of tuition or other college expenses.
So the American Recovery Act increased the credit amount available by $700 and in addition expanded the expenses covered by the tax credits. And in addition to expanding the expenses, also allowed that with respect to the first four years of college as opposed to just the first two available with respect to Hope credit.
So, again, targeted to something very important to middle-class families and to the country as a whole, incentivizing secondary education in a way preparing us for the new economy by getting our citizens as best and well educated as we possibly can.
And as well, focusing on another priority for middle-class families, which is buying their first home. The Recovery Act provided an $8,000 tax credit for individuals or families that purchased their first home. That was later extended so that it is available even this year with respect to houses purchased before April 30th -- so we’re coming to the close of the availability of that credit. It’s important for people to know about this as well. Again, the Recovery Act created this credit, made it available in 2009. It is available in 2010 as well, as I mentioned, with respect to houses purchased before April 30th. And if you purchase a home in 2010 you can claim the credit on the return you're filing this year -- so even though your tax return for this year filed in 2010 covers your 2009 year, you can claim with respect to homes purchased in 2010 on the tax return you may be about to file. So again, important for people to know about that.
And then as I mentioned, April 30th, the time in which you have to have purchased the home -- and again, not to get too technical, you have to have entered a binding contract and if you haven’t actually purchased and closed by April 30th you have the binding contract and close before June, then you're okay.
And then finally, the residential tax credit, again, something very important to people in the country making their houses better and more efficient, a 30 percent tax credit available with respect to certain improvements to your house, with respect to energy efficiency -- so insulation, energy efficient water heater, better doors, windows, as well as some alternative fuel systems as well -- solar energy, wind energy. Make those improvements to your home, you can be eligible for a 30 percent tax credit, capped at $1,500 for 2009 and ’10. And again, buy and put it in use last year, claim the credit this year; or put it in use this year, you can claim it next year. But, again, very important priority for people and the country.
With that, again going over the major provisions -- and there are a whole host more in the bill --- for example, purchased a car, deduct a sales tax; improvements to the Child Tax Credit, Earned Income Tax Credit as well, I don't want to slight those, but in an effort to move along it’s just the highlights. I'll now turn it over to Jared to provide some context on all this.
DR. BERNSTEIN: Thank you. I have just a few brief comments, putting these tax cuts and credits in the somewhat larger context of the Recovery Act and the economy in general.
It’s important to recognize that these tax cuts do double duty. First and more importantly in the ways that Michael just articulated, they provide much needed relief for strapped families during these tough times. And in fact, even well before this recession took hold we know that middle class families were challenged just making their basic family budgets go the distance, given their earning opportunities in the job market -- whether it was the cost of housing, health care, college, maybe an investment in the home -- these credits are essential to help them make ends meet.
But second, when folks spend this extra money they create more economic activity that in itself helps create more jobs. In this sense, the tax cuts are one reason why the Recovery Act is widely credited with creating or saving more than 2 million jobs so far.
Already this season tax refunds are up around 10 percent, close to $300 per person compared to last year. And that's based, as you’ve heard, on incomplete filing so far. Now, that’s a broad average. For a young family starting out with a new home purchase you're talking about an $8,000 credit. For a middle class family paying college tuition and expenses you're talking about $2,500.
We know that folks don't always see these tax cuts in action the same way you do when you're driving down the road and you see a construction zone with one of those Recovery Act signs by it -- I recently traveled with the Vice President to a factory that's creating hundreds of jobs based on a manufacturing tax credit. But we know they’re out there making life a little bit easy for American families to get through these tough times and to invest in their future.
Thank you.
Q My question -- perhaps for Michael or for all three of you -- is about the housing credit, in particular. With the housing market in the state that it is today, is this something that the administration is considering extending past the end of April deadline? And if not, why not?
MR. MUNDACA: I'll take that. We’re focused right now on trying to get information out to people with respect to the tax credits that are available. About 40 percent of people have not yet filed their tax return, so over the next week it’s very important for people to have the information about what’s available right now to them. Even those that have filed and maybe didn't realize they were eligible for a credit have a chance to amend their return to get it.
So again, we’re trying to get the word out on the credits that are available right now, important credits with respect to homeownership, with respect to working, with respect to home improvement, so that people when they file get what they deserve and get what is owed them under the Recovery Act.
DR. BERNSTEIN: I just want to make sure this is -- not in response to that question, just to make sure that I was clear about a number I cited. I mentioned that tax refunds are up around $270 per person compared to last year, and as you just heard from Michael there is a considerable amount of folks who have yet to file.
The average refund so far is a record $3,000 -- up 10 percent -- and folks at the IRS told us that’s largely due to the Recovery Act credits we’ve been discussing.
Q Thanks for taking my call. I wanted to ask about something that the President mentioned that you guys didn’t, which is the tax-free status of the first $2,400 of unemployment compensation, which expired at the end of ’09. I’m just curious if there’s any interest in the administration in extending that. I haven’t heard much talk about that at all, but given that we’re still at 9.7 percent, if there’s just any interest in keeping that provision going.
MR. DEESE: That is a provision that was an important component of the Recovery Act and something that we would like to see but as part of a broader effort to extend unemployment insurance, the benefits of unemployment insurance, to those who are -- who have been laid off and who are out there working -- looking for work and struggling. So that is a provision that we support, but it’s part of a broader effort. And that’s one of the things that when Congress gets back next week is going to need to be first order of business, and we’re very much hopeful that we’re going to see some near-term action on extending unemployment insurance.
MS. BRUNDAGE: Great. Well, thanks, everyone, for joining the call and thanks to our speakers. Just a reminder that this call is embargoed for 6:00 a.m. Eastern time tomorrow, as is the President’s weekly address. Thanks again for joining.
OPERATOR: Ms. Brundage, we do have a new question that did appear.
MS. BRUNDAGE: Oh, okay, that’s great. Why don’t we take it if we still have our speakers on the line.
OPERATOR: We do have two other speakers remaining.
Q Just a question about the website tool. You said you have 100,000 people. When did it actually go live? And it seems a little late to have that out -- shouldn’t it have been out sort of in January? Thanks.
MS. BRUNDAGE: I’m not sure -- we may have lost our speakers, given it seemed as though we were ending the call. I could pull the exact date, but it was -- I want to say it was about three to three and a half weeks ago that the tool went live. But I will pull the exact date and email it over to you, Jon, and anybody else who needs that date, as well -- you can call the press office.
Q Okay, thank you.
MS. BRUNDAGE: Great, thanks, everybody.
END
3:26 P.M. EDT
Categories: Economy, Office of the Press Secretary, Press Briefings, Taxes Tags: