Obama State of the Union 2010 – Stimulus Check No – Tax Credits Yes

by Mike Holman

Several new tax credits aimed mainly at the middle class will be announced tonight in the 2010 Obama State of the Union speech.  Unfortunately, it looks like there will be no stimulus checks issued in 2010 but the year is still young.

The health care reform issue should be addressed but no specifics have been released as yet.

Here are some proposals with the more significant ones appearing first:

Student loan payment cap

Federal student loan monthly payments will be capped to 10% of gross income minus a basic living amount which appears to be $6200.  For example, if you are earning $35,000 and have student loans of $30,000 then the annual payments will be ($35,000 – $6,200)/10 = $2,880 which means $240 per month.  This will benefit a large number of people who have big student loans – especially if they are not making a lot of money.

The Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit will be increased to 35% from the existing 20% credit now in place.  This applies to families making less than $85,000 (AGI) per year.  If you make between $85,000 and $115,000 then this credit will be prorated back down to 20% which is the amount applied if the family makes $115,000 or more.  If you make more than $115,000 then there will be no impact.

A maximum of $3,000 of child care expenses can be claimed for each of 1 or 2 kids.  The maximum tax credit for a family with 2 kids will increase from $1200 to $2100.

Child care funding will also increase by $1.6 billion.

Saver’s Tax Credit

The Saver’s Credit will be increased to match 50% of the first $1,000 of retirement account contributions for families earning under $65,000 (up from $55k).  A partial credit will be available for families earning between $65,000 and $85,000.

Mandatory Workplace IRAs

This proposal calls for all employers to provide automatic direct deposit IRAs (Individual Retirement Accounts).  It won’t be mandatory for employees to take advantage of these accounts but they will always have the option.  Small firms will be exempt.  This proposal is interesting since IRAs are already available from other institutions (unlike 401(k) plans).

More support for caregiving families

Families caring for relatives will benefit from increased funding to the Department of Health and Human Services caregiver support programs.  This extra funding should make it easier to get more free help if a family or individual is caring for an aging relative.

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{ 3 comments… read them below or add one }

1 Doctor Stock

I enjoyed watching the “show.” Curious to know what you’re thoughts were overall as it relates to the Markets…

2 Mike

DS – I thought the speech was pretty good but nothing really significant came out of it. All the financial details where released a few days before the speech so I don’t think there will be any impact to the markets.

He more or less acknowledged that he hasn’t been able to make the “change” that he promised before being elected which is interesting but not that meaningful.

He announced a gov’t spending freeze which I think the markets will like but it excluded some big programs and doesn’t start until 2011. Kind of like going on a diet starting “next week”. 🙂

3 Jim

There won’t be a stimulus check for 2010 for the elderly,disabled,and Us vets, the senate voted against giving the stimulus check to the elderly,disabled and the Us vets that deserved it but the replubicans and 10 democrats voted against it.I think its time to go back to we the people and not we the goverment the senate should be marked sociallism and we should fire them and they know who they are.

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