Shakespeare Wealth Management Inc.: Stimulus tax provisions & your wallet


Kevin Reardon

Owner & President

Shakespeare Wealth Management, Inc.


[email protected]

Brookfield, WI – President Obama recently signed the American Recovery and Reinvestment Act of 2009. But how much tax relief will it actually provide for most Americans? Not much, says Kevin Reardon, CFP®, President of Shakespeare Wealth Management in Brookfield.

“For openers, the bill is about two-thirds governmental spending and one-third income tax reductions,” Reardon explains. “It provides for no reduction in ordinary income tax rates nor is there a reduction in capital gains rates. In many ways, this is good news considering that the campaign rhetoric called for raising taxes on all individuals with incomes over certain debatable thresholds.”

The bill offers various benefits and phase-outs that differ for singles and married couples, including:

• Extension of AMT Relief for 2009 – By far the single most impactful provision will be the extension of the Alternative Minimum Tax (AMT) relief for this year. You may remember that there is an AMT benefit that has been constantly re-enacted by Congress each year for the past several years. The current law requires a higher AMT. Each year, Congress re-initiates a higher “benefit/exclusion/patch” amount negating the scheduled increase in AMT. The dollar benefit varies for individuals, but ranges between $2,000 and $5,000 dollars.

• “Making Work Pay” Credit – The drafters feel that the bill would cut taxes (albeit very marginally) for more than 95% of the working families in the United States. For 2009 and 2010, the bill provides for a refundable tax credit of up to $400/$800.

• Economic Recovery Payment to Recipients of Social Security – This is a one-time payment of $250 to retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration and the Disabled Veterans Administration. The combination of this credit and the Making Work Pay Credit cannot exceed $400/$800.

• Increasing the Earned Income Tax Credit – Working families with three or more children will receive a temporary increase in the tax credit. This credit is basically welfare administered by the treasury and this is how many lower income families receive refunds in excess of the total tax withheld and even in excess of their tax liability. The credit is phased out for incomes in excess of $16,000/$19,000.

• “American Opportunity” Education Tax Credit – The stimulus bill provides financial assistance for individuals seeking a college education. In 2009 and 2010, taxpayers will benefit by up to $2,500 against the cost of tuition and other expenses. The phase-out applies to those with incomes in excess of $80,000/$160,000.

• Refundable First-Time Home Buyer Credit – Last year, Congress provided taxpayers with a refundable tax credit that is equivalent to an interest-free loan equal to 10% of the purchase of a home, up to $7,500 for first-time homebuyers. That provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or if earlier, when the house is sold. The credit phases out for incomes in excess of $75,000/$150,000.

• Sales Tax Deduction for Vehicles Purchased – the bill provides all taxpayers with a deduction for any state and local sales and excise taxes paid on the purchase of new cars, light trucks, recreational vehicles and motorcycles through 2009. The deduction is phased out for incomes in excess of $125,000/$250,000.

“Most of these provisions will likely have only marginal impact on most peoples’ tax position, with the exception of the extension of AMT relief,” added Reardon. “It is interesting, and perhaps a luxury, that we probably know this year’s tax law as early as February. There will be some relief to lower income individuals.”

About Shakespeare Wealth Management

Shakespeare Wealth Management provides unbiased financial solutions to successful individuals, businesses and organizations. We are a Fee-Only™ Registered Investment Advisor committed to helping you and your family to achieve its goals. Shakespeare will assist you in managing all aspects of your Wealth, including: Investment Management, Financial Planning, Estate Planning, Tax Management, Insurance Planning & Review, Charitable Planning, and Succession Planning. For more information, please visit