Skip to content

The Economic Stimulus Plan: What It Means to You

President Obama and congressional leaders have agreed on an ambitious, complex plan of expenditures and tax cuts with the hope of reviving a struggling national economy. Congress is expected to approve and Obama to sign the $789 billion measure that includes nearly $300 billion in tax cuts and more than $450 billion in new spending—most of it to be allocated in the next two years.

Here is a look at several features with an emphasis on what they mean to you.



As a candidate, Obama promised to cut taxes for 95 percent of Americans. This is his delivery on that promise. Everyone earning $75,000 or less would receive a tax cut of $400, with a limit of $800 per household.

What it means to you:

If you earn $75,000 or less, you would receive a $400 tax refund on payroll taxes paid. This is for the 2009 and 2010 tax years. The IRS would likely alter withholding tax schedules so you would benefit from the tax cut immediately. The cut is gradually reduced for individuals making more than $75,000 and is eliminated for those making more than $100,000.


This is a one-time $250 payment to Social Security recipients, including disabled and older veterans and Supplemental Security Income (SSI) beneficiaries.

What it means to you:

If you’re receiving Social Security benefits because you’re over 67, or receiving SSI benefits, or are a disabled veteran, you would qualify for a $250 one-time payment. This would likely be distributed as an additional payment.


This $70 billion reduces the impact of a 40-year-old law that was aimed at fewer than 100 millionaires who avoided paying income taxes in the 1960s. Without this fix, it would force millions of middle-income taxpayers to pay a penalty.

What it means to you:

You might be spared the higher alternative minimum tax if your tax bill is otherwise reduced by a number of tax credits, exemptions and a deduction for especially high property taxes.


The earned income tax credit (EITC) has been steadily expanded since 1975; today, 21 million poor, working American families receive more than $36 billion in benefits. Increasing the credit is an effective economic stimulus because the poor are more likely than wealthier families to spend the extra money.

What it means to you:

This is a targeted benefit for the working poor. It raises the EITC from 40 to 45 percent of qualifying income. If you earn between $7,470 and $13,440, you would receive an extra $457; if you have three or more children and earn between $16,420 and $40,295, you would receive a credit that grows from $5,028 to $5,657.


This expands an existing tax credit for educational expenses by increasing the size of the benefit and extending coverage to include more expenses.

What it means to you:

This expanded education tax credit would be available to anyone with income under $80,000. The credit—which covers a portion of tuition, fees and supplies—would range from $1,800 to $2,500. The benefit gradually decreases as your income exceeds $80,000 and phases out completely when you earn more than $90,000. This would cover expenses for 2009 and 2010.


This expands a program enacted by Congress last year that provided a credit for first-time homebuyers. Under existing law, the credit covers only primary residences and must be repaid over 15 years. Under the stimulus proposal, the payback requirement would be waived.

What it means to you:

If you are a first-time homebuyer with income between $75,000 and $95,000 ($150,000 to $170,000 if married and filing a joint return), you would receive a tax credit of $7,500. The qualifying house must be your primary residence and must be purchased between January and June 2009. The new law waives a controversial requirement that the credit be repaid.



Obama, the House and the Senate agreed on a wide range of new construction projects with the hope of creating 3 million new jobs over the next two years

That includes so-called green jobs that make public and private construction energy-efficient and that encourage new energy production and research. The nation’s governors and mayors circulated multibillion-dollar lists of “shovel-ready” projects for new highway and building construction.

What it means to you:

The objective is to create jobs, revive the nation’s financial system and strengthen the economy. For 50-plus America, that would mean being able to work longer and salvaging retirement savings plans. Since October, Americans have lost a collective $1 trillion from their 401(k) accounts, and those who tried rolling their 401(k)s into individual retirement accounts lost an additional $1 trillion. Unemployment among people over 55 has risen to a 31-year high, and one in four retirees says he or she has considered returning to work because the income is needed. Of those facing foreclosure, 700,000 are over 50.


The measure provides $19 billion for Health Information Technology investments. It also provides $87 billion to expand the federal share of Medicaid, the federal health care program for the poor, and it expands health care coverage for newly unemployed through the COBRA (Comprehensive Omnibus Budget Reconciliation Act) program.

What it means to you:

The biggest impact may be from the Medicaid adjustments, which will minimize higher state and local tax increases that states would otherwise impose since they must balance their budgets each year. The Health IT program is a long-delayed investment in streamlining and coordinating information sharing among doctors, hospitals and pharmacies.


Obama and Congress agreed to improve energy efficiency. They want to double alternative energy production in three years, modernize 75 percent of federal buildings, improve energy efficiency in 2 million homes, extend the Low Income Home Energy Assistance Program and provide incentives for weatherization.

What it means to you:

Soaring energy prices have squeezed millions of older Americans living on fixed incomes, driving up gasoline, home electricity and heating costs. New programs are designed to help cut energy prices, make home heating less expensive, and make homes and buildings more energy-efficient.


With 46 of the 50 states facing significant budget deficits this year, Congress and the president agreed to expand the federal share of Medicaid and help finance new school construction.

What it means to you:

Projected state budget cuts also affect those relying on Medicaid for long-term care and those seeking job training at financially strapped local schools and community colleges. Older Americans facing time pressure and fixed incomes are especially likely to benefit from a stronger economy.

Jim Toedtman is editor of the AARP Bulletin.

Join the Discussion

0 %{widget}% | Add Yours

You must be logged in to leave a comment.

AARP In Your State

Visit the AARP state page for information about events, news and resources near you.