Tax time is never fun. But this year, millions of middle-class families will be paying less tax and getting more back in the form of their tax refund check in the mail. The American Recovery and Reinvestment Act, passed last year, reduced taxes by almost $100 billion last year and by $220 billion this year.
As a result, Northern Virginians are encountering lower taxes and larger tax refunds-in fact, refunds are up 10% this year, to an average of $3,036. As you file your federal tax returns this Thursday, keep in mind the many new credits and deductions created by the Recovery Act.
At a time when America appeared to be on the verge of another depression, President Obama and the Democratic Congress passed the Recovery Act to help our economy start creating jobs again. It has invested in critical infrastructure projects across the nation, helped those hardest-hit by the recession, and has kept police officers, firefighters, and teachers on the job, serving our communities. And with our economy creating jobs again, it’s clear that the law is helping put America back on the right track.
The Recovery Act actually cut taxes — by a whopping 40% — to help businesses start hiring again and provide relief to middle-class families. Conservative economist and economic advisor to President Reagan Bruce Bartlett concludes: “federal taxes are very considerably lower by every measure since Obama became president.”
How these tax cuts benefit Northern Virginians? This year, as you’re filing your taxes, you might be eligible for the following benefits:
• Making Work Pay credit: 95% of working families are receiving this credit, which means $400 less in taxes for individuals and $800 less for married couples. You’ve probably already seen the effects of this credit in your paycheck.
• College expenses: Families and students can claim up to $2,500 to pay for college expenses.
• First home purchase: If you have bought your first home by April 30 of this year, you can claim an $8,000 deduction. And many other homebuyers can claim a deduction, as well.
• Energy efficiency incentives: If you’ve made your home more energy efficient through steps like adding insulation or energy-efficient windows, you’re probably already saving money on your energy bills. But now, you can also claim a $1,500 tax credit.
• New vehicle purchases: If you bought a new vehicle between February 17 and December 31 of last year, you can deduct the state and local sales taxes from your federal tax return.
• Family tax credits: If you’re a moderate-income family, the Recovery Act increased your tax credits: the Earned Income Tax Credit is now $5,657, and it’s now easier to claim the Child Tax Credit.
• Tax-free unemployment benefits: Unemployment benefits are usually taxable-but if you were looking for work last year, the Recovery Act made the first $2,400 in unemployment benefits tax-free.
For an easy way to see which tax benefits are available to you under the Recovery Act, check out the Tax Savings Tool at www.whitehouse.gov/recovery.
These are still the hardest times we’ve seen in decades, and America has a long way to go before its economy is fully back to health. But in a little more than a year since the Recovery Act was signed into law, we’ve made real progress-and the tax cuts in the Recovery Act are part of the reason why. I hope you’ll take full advantage of them this year.
Rep. James Moran (D) is Virginia’s 8th Congressional District Representative in the U.S. House of Representatives.