What President Obama's budget means for your wallet

Stacks of the President's Fiscal Year 2017 Budget sit in the House Budget Committee Room in the Cannon House Office Building on February 9, 2016 in Washington.
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Depending on your circumstances, President Obama's final proposed budget of his presidency could help you save more for retirement, cut the price of college or trigger a bigger bill come tax time.

At least, in theory.

The president sent his $4.15 trillion package for fiscal year 2017 to Congress on Tuesday. The proposal would raise spending by 4.9 percent, primarily through increases to mandatory programs, including Social Security (with $967 billion requested for 2017), Medicare ($602 billion) and Medicaid ($377 billion).

It's uncertain how many of the discretionary budget ideas will ever materialize.

Many are issues and ideas that President Obama has previously brought up (unsuccessfully) in earlier budgets and other initiatives. Even before the budget was released, House and Senate Budget committees announced they would not invite the Office of Management and Budget director to review the president's budget.

"In the days to come, House Republicans will be offering a clear alternative to the president's stale, big government policies," House Budget Committee Chairman Tom Price later said in a statement.

As proposed, however, here are 11 ways the president's budget would affect your wallet.

— By CNBC's Kelli B. Grant
Posted 11 February 2016

More options for childcare

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Working parents would have more options for child care under the proposed budget, whose initiatives include expanded access to high-quality preschools and child care for low- and moderate-income families, and state incentives to offer full-day kindergarten.

That could have a substantial impact on the family budget: Average child-care costs exceed the average mortgage payment in 24 states and Washington, D.C., according to Child Care Aware America's 2015 report. In 22 states and D.C., child care accounts for more than 12 percent of median income for a married couple.

The budget also calls for expanding eligibility for the child-care tax credit and increasing the maximum credit to $3,000 per child. Currently, depending on their income, consumers can claim a credit worth 20 percent to 35 percent of up to $3,000 in qualifying expenses for one child and $6,000 for two or more — for a total credit of up to $1,050 for one child or $2,100 for two or more. The current credit begins to phase out for families earning $15,000; under the proposed budget, the credit only declines for those earning $120,000 or more.

The catch: The budget would also repeal dependent-care flexible spending accounts, which currently allow individuals to set aside up to $2,500 ($5,000 for married couples) in pretax dollars to cover child-care expenses. As it stands, taxpayers using such accounts are only allowed to claim the tax credit on expenses exceeding FSA contributions — they can't double dip.

Free college

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President Obama has repeatedly pushed the idea of free two-year community college, mentioning it again in his final State of the Union address and in the proposed budget. (The value of that idea? During the 2015–16 academic year, tuition at public two-year in-district colleges averaged $3,435, according to College Board.)

Congress has yet to move on the America's College Promise Act of 2015, a federal bill that would authorize tuition waivers, but some states have launched their own initiatives. Minnesota, Oregon and Tennessee already have free community college programs in place, and 11 more states introduced legislation in the past year.

Higher taxes on gasoline and tobacco

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To pay for many of its initiatives, the budget proposal would by $10.25 per barrel on crude oil, adding roughly 24 cents per gallon to the price of gasoline by the time the increase is fully phased in, in fiscal year 2022. Currently, the national average for a gallon of regular unleaded is $1.72, according to the AAA. That includes a federal gas tax of 18.4 cents per gallon. (Congress last approved a federal gas tax increase in 1993, raising the rate from 14.1 cents per gallon.)

Other funding would come from higher taxes on tobacco. Currently, the federal tax on cigarettes is $1.01; the proposed 2017 budget (and President Obama's previous budgets) calls for an increase of about 94 cents per pack and comparable increases on other tobacco products, as well as indexing the tax rates for inflation.

Medical bill relief

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Over the past two years, almost one-third of privately insured Americans have received a surprise medical bill where their health insurance paid out less than expected, according to a 2015 survey from the Consumer Reports National Research Center.

The proposed budget would try to curb surprise out-of-network charges for receiving services at an in-network hospital by requiring hospitals to try to match patients with in-network providers and requiring physicians regularly working with hospitals to accept in-network rates as payment in full. The budget also pushes for uniform health-care billing documents, which could make it easier for patients to decipher charges and spot errors.

More retirement savings options

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Workers who aren't currently covered by a retirement savings plan would be more likely to have access under the proposed budget. Initiatives include automatic IRA enrollment for employees at companies with 10 or more workers that don't currently offer a retirement plan — a move that would affect an estimated 30 million Americans. Another proposal would expand access to Multiple Employer Defined Contribution Plans, making it easier for smaller firms to offer their workers a retirement plan.

Part-time workers could also gain access to their employer's 401(k) or other existing plan if they have worked for that company at least 500 hours per year for the past three years. Currently, plans typically exclude part-time workers. Even without an employer match, that access could boost savings substantially — instead of the $5,500 IRA limit (before any catch-up eligibility), workers could set aside up to the $18,000 cap in a 401(k), 403(b) or other profit-sharing plan.

Family tax breaks

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Families could see an additional tax break, with the budget proposing a new second-earner tax credit of up to $500 for married couples in which both spouses work. The credit would phase out for couples earning more than $120,000.

So-called childless workers — those who don't have a qualifying dependent, as well as noncustodial parents — would see their earned income tax credit increase double to roughly $1,000. (Currently, the credit is worth as much as $503 for childless households.) EITC eligibility would also expand to cover younger (ages 21 to 24) and older (65 to 66) taxpayers without a qualifying child; currently taxpayers must be at least age 25 but under 65 at the end of the year.

College tax help

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Parents of college students currently have two credits to choose from: The American Opportunity Tax Credit (worth up to $2,500 per student for the first four years) or the Lifetime Learning Credit (worth up to $2,000 per tax return). The budget would fold the LLC into the AOTC and expand the break to five years. The credit would also be refundable up to $1,500 instead of the current $1,000.

Another proposed break would exempt Pell Grants (currently worth up to $5,815) from taxation and also exclude them from calculations for the AOTC. A third initiative targets student loan forgiveness. In most cases, current tax law requires the forgiven amount to be included in your gross income; under the proposed budget, that would not be taxable.

But the budget also includes a proposal to repeal the student loan interest deduction for new borrowers.

High earners would pay more

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High-income taxpayers could expect to see their tax bill increase. Capital gains taxes, which currently max out at 20 percent for those in the 39.6 percent tax bracket, would increase to 28 percent (including the 3.8 percent net investment income tax).

Proposals in a section titled in part "closing tax loopholes for the wealthy" include capping the value of itemized tax deductions and other breaks at 28 percent, limiting the ability of taxpayers in higher brackets to reduce their taxable income. That change, the budget notes, would affect single taxpayers earning $200,000 or more, and couples earning more than $250,000.

Then there's the so-called Buffett Rule. If implemented as proposed, it would require high-income taxpayers to pay a tax rate of at least 30 percent of income after charitable deductions.

More Pell Grant money

Source: FAFSA

Filling out the Free Application for Federal Student Aid is already set to get easier, with earlier access this year, a streamlined form and automatic retrieval of relevant tax information. The budget proposes eliminating up to another 30 "burdensome and unnecessarily complex" questions. The net result: Families can get a sense of their aid options and college affordability much earlier in the application process, potentially lowering their student loan debt burden.

The budget would also enhance Pell Grants, increasing their maximum annual award to $5,935 and indexing them to inflation. Students taking at least 15 credit hours a semester could receive an additional $300. Another proposal would bring back year-round Pell Grants, allowing students to access funds for a third semester if they have already completed a full-time load of 24 credits that year.

Extra help for the unemployed

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More taxpayers could be eligible for unemployment benefits under the proposed budget, which would require coverage for part-time workers and those who leave due to "compelling family reasons." According to budget documents, those might include domestic violence or family illness.

The budget would also allow long-term unemployed workers to make penalty-free withdrawals of up to $50,000 per year for two years from tax-advantaged retirement accounts. Currently, consumers may face an early withdrawal penalty of 10 percent.

Other proposals would extend unemployment benefits during times of economic downturn, up from a typical 26 weeks in normal economic climates. It would also implement wage insurance for laid-off workers who take a new lower-paying job of less than $50,000 per year. The insurance would pay half the difference between the new and previous wages, up to a total $10,000 over two years.