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How to Make the Stimulus Work for You

Whatever your situation, whether you work or are unemployed, the government has something for you in the $787 billion stimulus package. Plus there are extra benefits to help compensate for some of those major life expenses such as a house or a car, and yes, your kids.

Whether the money is intended to help you survive the recession or entice you to spend money, you'll want to be smart about maximizing your potential benefits. Through a little tax planning, you can begin to put more money in your pocket now. That planning may include adjusting the amount of taxes taken out of each paycheck so you can benefit from even a slight bump in take-home pay, rather than receiving a lump sum when you file your 2009 tax return early next year. Getting the money sooner accomplishes the goals of the stimulus — putting more money in your hands now to help boost the economy.

"The government would encourage that," said Susan Carlisle, a Woodland Hills, Calif. certified public accountant. "We're trying to encourage people to have more money and to loosen up."

A word of caution, though. Be sure you don't overdo it and reduce your tax withholding by too much or you'll risk owing the government money.

The Internal Revenue Service is still working on some of the details of how it will implement the bill signed by President Barack Obama on Tuesday. It promises to provide frequent updates on its Web site.

For Workers:

Benefit: Obama's signature "Making Work Pay" tax credit entitles individuals who make less than $95,000 to a tax credit of up to $400 for 2009 and 2010; couples are eligible for $800.

For example, if you're single and make $40,000, you'll get about $66 a month more beginning July 1. A couple filing jointly with the same income would see $134 more.

The credit is phased out for individuals making more than $95,000 and couples making more than $180,000. Millions of low-income workers who don't make enough money to pay income taxes would get checks from the government when they file their 2009 tax returns.

What you should do: If you're eligible, your payroll administrator will make the withholding adjustment automatically and thereby increase your take-home pay. You may prefer not to adjust your withholding amount and get your stimulus in a lump sum payment as a tax refund when you file your 2009 taxes. If so, you'll have to discuss that with your employer, said Amy McAnarney, executive director of The Tax Institute, a division of H&R Block.

Here's a brief guide to some of the other benefits and what you may do to maximize your opportunities:

For the Unemployed:

Benefit: A $25 weekly boost in unemployment checks through 2009. In addition, the first $2,400 in benefits will be exempt from federal taxes in 2009. For workers who've exhausted their regular unemployment benefits, the stimulus bill provides up to 33 weeks of extended unemployment benefits through Dec. 31.

Also, eligible unemployed workers paying for their own health insurance through the federal COBRA program will benefit from a 65 percent federal subsidy for their monthly insurance premiums for up to nine months.

What you should do: If you're currently receiving unemployment, to ensure that you obtain the $25 a week pay boost, you'll need to contact the state agency administering your benefits for details.

For the COBRA benefit, if you lost your job between Sept. 1, 2008, and the end of this year, you can apply for this subsidy. If you didn't elect COBRA insurance coverage initially, you will be given an additional 60 day period to sign up and receive the subsidy. Tax professionals said details of how the COBRA subsidy will be administered are being worked out, but likely it will be through your former employer. They recommend calling your former employer within 60 days to get details.

For Homebuyers:

Benefit: If you're thinking about buying a home, the tax credit of 10 percent of the value of the home, up to $8,000, is meant to entice you to make the leap. If you live in the house for three years, you will not have to repay the money. To qualify, you must have bought a home between Jan. 1, and Dec. 1, 2009.

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What you should do: If you bought a home in 2009 and you've already filed your taxes for 2008 and claimed the previously existing credit of $7,500, you can file an amendment to get the remaining $500. Otherwise, file for the benefit when you do your 2009 taxes next year.

For Homeowners:

Benefit: The plan also includes tax credits for energy-efficient improvements such as adding qualified new furnaces, windows and doors to existing homes. The credit applies to 2009 and 2010 tax returns, with a lifetime cap of $1,500.

What you should do: The credit is 30 percent of the price of the items purchased. You'll need to fill out IRS Form 5695 specifically designed to claim energy efficient property tax credits.

Check out Carmen Wong Ulrich's On the Money for more tips:

For Car Buyers:

Benefit: You can deduct the state and local sales and excise taxes paid on the first $49,500, toward the purchase of a new car, light truck, recreational vehicle and motorcycle. The vehicle must be purchased by the end of the year. This benefit does not apply to single filers making more than $150,000 or joint filers making more than $250,000.

You could get a tax credit of up to $7,500 if you buy a plug-in hybrid vehicle or plug-in conversion before 2012.

What you should do: Again, if you're sure you're going to buy a car, you can decide to wait for the money and claim it on your taxes next year or you can adjust your payroll withholding for more immediate payment.

For Parents:

Benefit: A child tax credit of up to $1,000 for each qualifying child under 17. It is a refundable credit, which means people who qualify but have no tax liability because their income is too low, can file a return to receive the money.

The stimulus act also expands the earned income tax credit for poor families with three or more children that pay no income taxes. More than 22 million families qualify for the credit, one of the government's largest anti-poverty programs.

What you should do: These benefits are obtained through your tax filing process.

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