2009 Economic Stimulus Package FAQs

President Obama has signed into law an economic stimulus package that covers 2009 and 2010. The stimulus plan, which costs $787 billion over two years, is more than 700 pages long. To break it down for you and to summarize the key provisions, we have developed this 2009 Economic Stimulus Package FAQ.

Economic Stimulus Payment and Check

Q. What is President Obama’s economic stimulus package called?

A. The stimulus package is called the American Recover and Reinvestment Act of 2009, and it was signed into law on February 17, 2009. You can read the full version of the Act here, but be warned that it’s more than 700 pages long, which is why we’ve developed this Q&A.

Q. Does the plan include an economic stimulus payment?

A. This is probably the most important question on everybody’s mind. The stimulus plan provides for what is called the Making Work Pay Tax Credit. The credit pays up to $400 to working individuals and $800 to married taxpayers who file joint returns.

Q. Do I qualify for the Making Work Pay Tax Credit?

A. The tax credit will begin to phase out (be reduced) for individual taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly. The credit is eliminated altogether when an individual taxpayers adjusted gross income reaches $100,000, or $200,000 for married couples filing jointly.

Q. How is the Making Work Pay Tax Credit calculated?

A. The stimulus payment is actually what is called a refundable tax credit. This means that taxpayers can receive the stimulus payment even if they do not owe any taxes. The refundable credit is calculated by multiplying earned income by 6.2%.

Q. How big will my stimulus payment be?

A. The amount of the stimulus payment depends entirely on your earned income. For individual tax filers, earned income must be at least $6,452 to receive the full $400. Married couples filing joint returns would need earned income of at least twice that amount to receive the full $800 stimulus payment.

Q. Will I receive an economic stimulus check?

A. No. Unlike the 2008 stimulus plan under President Bush, this 2009 economic stimulus package distributes the payments by reducing the tax withholdings your employer takes from your check.

Q. What if my employer does not withhold taxes from my check?

A. According to the IRS, for those who are not subject to income tax withholding, they can claim the credit when they file their 2009 income tax returns.

Q. When will I receive my economic stimulus payment?

A. June 2009. Under current plans, the reduced income tax withholdings are set to begin in June.

Q. How long will the stimulus payments last?

A. The stimulus payments are for 2009 and 2010. So in effect, there are two stimulus payments under the package.

Q. How much more money will I see in my paycheck?

A. Assuming you qualify for a $400 stimulus payment, you will see your monthly take home pay increase by about $15 per week in 2009 and about $7.70 in 2010. For those qualifying for a $800 tax credit, double these amounts.

Q. Do retirees who do not work receive a stimulus payment?

A. Yes. Because the payroll tax credit only goes to employees and the self-employed, the bill includes a one-time payment of $250 to recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income payments, and pension and disability benefits from the Veterans Administration.

Government retirees who don’t get Social Security will also get a one-time refundable tax credit of $250 in 2009.

For additional information, you can visit the IRS Making Work Pay Tax Credit page.

More than Economic Stimulus Checks

The American Recovery and Reinvestment Act provides for numerous tax breaks beyond direct stimulus payments. Here’s a list of the key provisions that affect individuals and small businesses.

Enhanced Child Tax Credit: The Child Tax Credit will cover more low-income earners. In 2008, the credit was refundable to the extent of 15 percent of an individual’s earned income in excess of $8,500. For 2009 and 2010, that floor drops to $3,000.

First-time Homebuyer’s Credit: The stimulus package increases the $7,500 first-time homebuyer credit to $8,000 for primary residences purchased between January 1, 2009 and November 30, 2009. And so long as the home isn’t sold within three years, the plan eliminates the requirement that the credit be repaid.

The Obama Administration also has implemented the Making Home Affordable Refinance and Modification Program for those struggling to make payments on an existing home.

New car sales tax deduction: Buyers of new cars, light trucks, SUVs, motorcycles and motor homes during 2009 can deduct the state sales or excise tax they pay, even if they don’t itemize their deductions. This break starts phasing out for single taxpayers with Adjusted Gross Income over $125,000 and couples with AGI over $250,000. Note that if you already itemize and choose to deduct state and local income tax, this deduction won’t help you.

Extended energy-saving credits: The 10 percent tax credit for energy-saving home improvements is increased to 30 percent and is extended through 2010. Improvements that qualify for the credit include energy-efficient skylights, windows and outer doors, along with energy-saving water heaters, central air conditioners and biomass stoves.

One-year “patch” on the Alternative Minimum Tax: To keep millions of middle-income taxpayers from being forced to pay the Alternative Minimum Tax (AMT) for 2009, the measure increases the minimum tax exemptions to $70,950 for couples filing jointly and $46,700 for single filers.

Bonus depreciation: A special 50 percent, first-year bonus depreciation is revived for assets bought and placed in service during 2009.

Loss carrybacks: Businesses that averaged $15 million or less in gross receipts over the past three years will be allowed to carry back losses for five years instead of two. The easing applies only to 2008 losses.

Reduced taxes on unemployment income: Normally, people receiving unemployment benefits must report them as income and can be taxed on them. The new bill makes the first $2,400 of unemployment income nontaxable.

Expanded Hope Credit: The Hope Credit for college costs is increased to $2,500 for 2009 and 2010, covering 100 percent of the first $2,000 of tuition and related expenses per year and 25 percent of the next $2,000. The credit is available for all four years of college, up from only two years, and covers the cost of books. It is 40 percent refundable, and begins to phase out at $80,000 of Adjusted Gross Income for singles and $160,000 of Adjusted Gross Income for married couples. The bill also allows tax-free distributions from Section 529 College Savings Plans to cover computer purchases.

Facts and Figures of the 2009 Economic Stimulus Plan

Q. How much does the stimulus plan cost?

A. The stated cost of the stimulus bill is $787 billion. That price tag is a bit misleading, however, because many of the programs in the plan will likely be extended beyond what the bill provides. According to the CBO, the 10-year cost of the package, including interest on the debt necessary to pay for the plan, tops out at $3.27 trillion.

Q. Will the American Recovery Plan help or hurt our economy?

A. As you might imagine, there is much debate and disagreement on this question. According to the CBO, however, in the long run, the stimulus program will hurt economic growth. By 2019, CBO estimates that the plan will reduce GDP by 0.1 to 0.3 percent.

stimulus-plan-and-gdp

Q. How is the stimulus money being spent?

A. The $787 billion package is divided into two parts. About $499 billion goes toward spending, and about $288 billion goes to tax relief. The spending portion will get distributed to federal agencies and state governments to be spent on projects and programs specified in the stimulus package. Here’s a high level breakdown of the spending:

  • State and Local Fiscal Relief: $144 billion
  • Infrastructure and Science: $111 billion
  • Protecting the Vulnerable (e.g., food stamps): $81 billion
  • Health Care: $59 billion
  • Education and Training: $53 billion
  • Energy: $43 billion
  • Other: $8 billion

If you have questions about The American Recovery and Reinvestment Act of 2009 that are not answered here, please leave a comment and we’ll add your question and an answer to this page.

Published or Updated: March 12, 2009
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Woodman says:

    Your answer to the question When will I receive my economic stimulus payment? states that the reduced income tax withholdings are set to begin in June. Publication 15-T requires the new withholding tables to be used no later than April 1st. May I ask where the June date came from?

  2. jeff says:

    “Q. How much more money will I see in my paycheck?

    A. Assuming you qualify for a $400 stimulus payment, you will see your monthly take home pay increase by about $15 per week in 2009 and about $7.70 in 2010. For those qualifying for a $800 tax credit, double these amounts.”

    – the $800 tax credit is split between two people, though, right? so you wouldn’t see “double these amounts” in each paycheck, just between the two paychecks added together, unless I’m mistaken..

  3. DR says:

    Woodman, several news sources reported that the changes to withholdings would not take effect unitl June. Let me try to track down a more definitive source.

  4. DR says:

    Jeff, if both spouses work, the limit is still $800.

  5. DR says:

    This article was featured in the carnival of personal finance: http://www.stocktradingtogo.com/2009/03/09/carnival-of-personal-finance/

  6. crystal says:

    Do you know when the folks who draw SSi or disability are supposed to recieve their one time payment of $250?

  7. Charles says:

    If I am not working this year but have earned enough for the Stimulus Credit will I get a check? How will the Stimulus Credit affect me if I am not on a payroll or W-2 form?

  8. DR says:

    Crystal, payments will be sent out at the end of May 2009.

  9. nancy says:

    I am confused. Will the maximum allowed stimulus of $800 be allowed for Married Filing Jointly couples who earn less than $200,000 as a family if only one spouse works and the other does not? or will the $400 be the only allowable credit since only one spouse is employed? I have seen both conflicting scenarios as being the new law….AND what if one spouse is self-employed and the other draws a paycheck? Please explain both scenarios. Thank you!

  10. nancy says:

    Also, if only one spouse works as the other stays home with the children, does that disqualify them altogether from receiving even the $400 stimulus if the one working spouse earns more than 100,000.00? Thanks.

  11. karen says:

    As a 69 year old widow does the stimlus benefit me? Like I need a new roof and only get 15000.00 a year. Where do I go to find this information?

    Thanks

  12. Rachel says:

    I am a college student and I have to write a 12 page paper on the pros and cons of this stimulus package and to be honest I can’t even come up with a whole paragraph on the pros however, with the cons I was able to write with no problem.
    *People need to be educated on this package before choosing sides. The package sounds wonderfull for the first few years until the U.S. looses all foriegn country support, goes bankrupt and or becomes a communist country.
    *I understand that no one person can turn our economy around within just a few weeks but Im not too confident that Obama can achieve any long term improvement within his 4 years either.
    –“His(Obama) blueprint for the future doubles the public debt in five years and triples it in 10,” Senate Minority Leader Mitch McConnell of Kentucky said in an interview. Representative John Boehner of Ohio, the top Republican in the House, said Obama’s budget will “hurt our economy and destroy the kinds of jobs we’re trying to save.”

    —-For more information check out bloomberg.com…it has helped me.

  13. nancy says:

    It takes money to make money right? Don’t the mega millionaires usually borrow their money aka use other peoples money to make their profits?

  14. DR says:

    Karen, if you are receiving social security, you are entitled to the $250 payment that is scheduled to be paid in May.

  15. nancy says:

    Dr. Does the $800 stimulus apply to couples if only one spouse works? Thanks

  16. nancy says:

    Also Dr. Lets say an individual had two jobs, would the withholding all be worked out at the end of the year with a tax refund or payment if per chance too much or too little had been taken out of the paychecks. And, is the tax stimulus simply less money out of your paycheck with the actual liability remaining unchanged? which of course would simply mean less of a refund or a larger payment at end of year. Thank you again.

  17. Robert says:

    Dr. Does the $800 stimulus mean that if me and my wife normally get an $900 dollar tax return, we will only get a $100 dollar return when we file in 2010 for 2009 year. The company where she works is telling her that if we are used to a $900 return we should change our withholding and increase it.
    Thanks for your time

  18. DR says:

    Robert, the stimulus payment should not cause you to pay higher taxes. Assuming your withholding is correct, the stimulus should increase the amount of your take-home pay. You shouldn’t have to increase your withholdings.

  19. DR says:

    Nancy, yes the $800 applies to couples even if just one works. And the additional withholding is an actual stimulus payment, not just less taken out of your paycheck that you have to repay later. As for having two jobs, I’m not sure how that would be handled. But since the stimulus payment is calculated based on how much you make, if the combined income still keeps you under the maximum stimulus payment, you should be ok.

  20. Billy says:

    Ok I just noticed that they are taking $40 less out of my pay check for Federal taxes than last year. Now will I have less of a refund or even more have to pay the Feds at the end of the year? Should I go to my payroll department and have more taxes taken out to avoid this problem? I so confused
    Thanks in advance
    Billy

  21. Tami says:

    If both you and your spouse work one full-time job and one part-time job, plus claim married on your W4 form, does that mean that each employer would in essence give you the $800 in each of your paychecks spread out over the course of the year? Thus causing you to have been paid $2,400 too much in stimulus money? Can you opt out of the stimulus package to prevent this from happening or do you need to change your withholdings to account for the “overpayment” of stimulus money which in turn could cause a tax financial burden when you file your taxes next year?

  22. Lauren says:

    What if you have more then one job? How do you NOT get the stimulous package on your 2nd job…if you didnt get rid of it, i heard you will be taxed HUGE next year?

  23. Eva says:

    I am a 59 yr old state retiree. Will I receive the $250.00?

  24. Noreen says:

    Does a self-employed person who does not have taxes taken from his paycheck but, instead, pays taxes quarterly receive a stimulus payment?

  25. Tina Lehman says:

    Will the children tax credit come as a check or is it on the making work pay tax credit? I didnt work this past year so my mother clamed my one child so how will that work then?

  26. william says:

    my taxs have already been filed this year. I did it on jan 20 th. i have not recieved any money yet nore do i know the amount of said stimulus check amount I will recieve if any this year. single parent I recieve no child support at all.i have one 17 old one 16 old and a grand daughter born dec 19 2007

    • DR says:

      William, the stimulus payment this year is not in the form of a check. This is different than the payment in 2008. Under the Obama plan, workers will receive stimulus payments by having less money taken out of their paychecks each payday.

  27. Lecia says:

    How does the first time home buyer credit work and will it work if the house is bought on a land contract. Can you still file for this now even though taxess have already been filed for this year.

  28. Chris says:

    Why are persons receiving Workmans Compensation resulting from injuries which have caused them not to be able to work excluded from all stimulus packages both 2008 and now Obama’s 2009?

  29. jerry says:

    I am retired,ssdisability, my wife is retired, ssi, and she also works. if she recieves a check for $250, will her tax deductions from her pay chech reflect less deductions. will she have to pay the check back?

  30. Roy says:

    If my withholding is reduced by $400 throughout the year, will my tax liability be lowered for my income level to the extent that I will not owe the $400 back to the govt. assuming my withholding is accurate for my level of income? I have not been able to get an answer to this question. It appears to me that the govt. is simply loaning me this part of my withholding until April 15th of next year!

    • DR says:

      If you are entitled to a stimulus payment, you get to keep; it’s not a loan. The confusing part is how the government is doing it. Last year they just cut a check; this year they are sending it out through lower withholdings. But it’s not a loan.

  31. melinda says:

    if i owe govement money will i recive a stimulas chek? i get va so im eligble, but can any one take this money?

    • DR says:

      Melinda, it likely depends on what government you owe the money to and for what. But checks are being sent out this month, so you should know soon.

  32. Shantyl says:

    Sooo, I’m just saying, but this is utterly ignorant. I think this is a terrible way to get the country out of this horrible economic downfall. It’s only making things complicated. I wasn’t a fan of Bush, but at least he gave a check and we knew what we were getting all at once, Obama is lowering the taxes taken out, but I don’t see how it’s any different, since we get all the taxes taken out of our checks BACK the next year? How is this helping us? Do we still get full taxes back next year? I think it’s confusing and is meant to be that way so the gov’t can screw us over! Politics….

  33. Niki says:

    I’m looking forward to getting stimulus payment and I’ve already filed my tax on Feb.
    But…I’m not working currently (in 2009).
    If they just take out less money from paycheck instead of sending check, that means, there is no way to get stimulus payment for me?

  34. cathy says:

    i am a sixty eight yr. old and need anew roof where can i find help too pay for it.

  35. Joan Marinello says:

    Who do I contact to receive my $250.00 Stimulus check???
    Telephone # would help..Thank You.

  36. Sam says:

    And for all those americans that has lost there jobs. This plan does nothing?
    sorry but 800 bucks a year in todays job move force oversea is like buying the starving man 1 fish and telling him live 2 years on it. instead of teaching him how to fish(Job)

  37. gt says:

    what if you arent working . how will you get your stimulus package??? will it still come by check????

  38. W#ilma Stuve says:

    I was supposed to get a stimulus was supposed to come June 5 2009. It went to a wrong bank One that i never had a account at. I am still wait for it to be deposit in national city acccount

  39. Nancy says:

    Ok, I received about $40 more per paycheck when the Publication 15 T was implemented….now that I am figuring out my taxes it has put me owing taxes for the first time in my life!!!! PLUS I HAVE A PENALTY CHARGE FOR UNDERPAYING!! What gives???? Is there anything I can do???

    • Phil says:

      You’re not the only one!

      Me and my wife are paying the IRS now for the first time in our lives too!!

      $1,100!

  40. Elizabeth Cunningham says:

    WHAT IF YOU DID WORK AND YOUR SPOUSE IS ON SSI AND HE RECIEVED HIS STIMULUS BUT YOU NEVER SEEN THE INCREASE IN YOUR PAYCHECK. THAT’S WHAT HAPPENED TO ME AND WHEN I ASKED THE ACCOUNTANT ABOUT IT SHE SAID I HAD TO FILE FOR IT WHEN I FILED MY TAXES IS THAT CORRECT?

  41. tina says:

    WE JUST TRIED TO FILE OUR TAXES AND WE WERE GIVEN A MUCH LOWER QUOTE THAN WHAT WE RECEIVED LAST YEAR ON OUR INCOME TAX REFUND. THEY SAID IT WAS BECAUSE WE DIDNT PAY AS MUCH IN TO FEDERAL TAXES. DOES THIS MEAN THE STIMULUS PACKAGE MADE OUR REFUND SMALLER OR DOES THIS MEAN WE ARE DEALING WITH A VERY CONFUSED TAX PREPARER?????

    • Visitor says:

      The stimulus package made your take-home pay higher, by reducing the amount of taxes taken out of your paychecks. So to answer your question, yes the stimulus did make your tax refund checks smaller, ut only because you received your money throughout the year.

  42. gary c says:

    where is the $250.00 2010 stimulus payment for social security that obama said that we would get

  43. Phil says:

    Get ready to pay every penny of this bullshit back at tax time.

  44. Robert S. says:

    DR- I am very confused about this whole situation. I understand that it comes in the form of less taxes being removed from my check, but when exactly will it start for me? I just filed my taxes the other day and it told me the amount it would be, but I have seen NO reflection of this on any of my checks. I went all the way back to before last June and all my withholding’s are still the same. I asked my employer and he had no idea either. He said if it was something they had to do or paperwork they had to fill out to make it so, that I shouldn’t look foreword to it because the company will never get around to anything like that.

    So, is it something my employer has to do and when should I start to see the difference in my check?

    • DR says:

      Robert, my understanding is that the lower withholdings were automatic and did not require anything from your employer. Believe it or not, my suggestion would be to call the IRS. Oddly enough, they can actually be helpful from time to time.

  45. Alexandra says:

    We file the return with my husband (married filing jointly) but my husband only got unemployment benefits during 2009 and I only got a 1099 Misc because my payment were made in cash. Do we qualify for the economic Stimulus? and How can we get it?
    Thanks

  46. Evelyn C says:

    I understand Obama gave us SS Disabled stimulus check of $250.00 last year but when will he start paying us the stimulus check for 2010. Its hard enough that we not getting our 3% increase.I do thank you Obama never the less for the stimulus payment be Are getting
    Thanks EvelynC Florida

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  48. jason says:

    what is causing the economy to contract instead expanding? do we need more money infusion into the system to accelerate economic growth? or what do you propose to get the economy back on track?

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