The government is giving away money these days. And, thanks to the $787 billion stimulus bill, which includes over $300 billion in tax incentives, you can actually get a piece of the action.

Last week we detailed some of the big tax breaks that you may be entitled to thanks to this stimulus bill President Obama signed into law on Feb. 17.  We addressed things like that make-work-pay credit, the first-time home buyer credit and the auto sales tax deduction.

This week we’ll tackle the new break for those expensive COBRA payments, the updated education credit, how you can benefit from going green, some mass transit perks and the status of the alternative minimum tax.

So pour a stiff drink and read on!

Help for the Unemployed 

If you lost your job and are receiving unemployment checks or making COBRA payments to keep your health care going (thanks to the Consolidated Omnibus Budget Reconciliation Act), President Obama is offering you some help. 

You know by now that you have to pay federal income tax on your unemployment compensation.  And if you haven’t already filed Form W-4V – Voluntary Withholding Request to have the maximum 10% withheld to cover some of the federal income tax you will owe, go do so right now. (Be sure to adjust your state withholding if you owe state tax on those checks as well.)

Well, the stimulus bill offers a bit of relief on those tax payments. Now you will NOT owe federal tax on the first $2,400 of the 2009 unemployment compensation you received, starting Feb. 17 -- the day the stimulus bill was enacted, says Mark Luscombe, principal federal tax analyst, with CCH, a tax service.

Of course amounts above that $2,400 are still fully taxable. But let’s say you’re in the 25% tax bracket. That tax break just saved about $600 in federal tax. Pretty cool.

Now on to those pesky COBRA payments.  They’re expensive. I know. I’ve been there. 

Again, the government is attempting to help.

If you lost your job between Sept. 1, 2008 and Dec. 31, 2009, you’ll only have to pay 35% of those COBRA premiums.  The government will take care of the remaining 65% for up to 9 months.

Of course there are income limitations: A single person’s income can’t be more than $125,000 and a couple filing jointly can’t have their income exceed $250,000.

And big note! If you lost your job after Sept. 1, 2008, and declined COBRA coverage, can opt to take it now. You have 60 days from the day of enactment (Feb. 17) to call your former employer, get back in COBRA and take advantage of this new subsidy.

Now Go Get Green

A credit for improving the energy-efficiency of your home already existed.  But it was a mere $500 and that was the max you could take, regardless of how many upgrades you made.

Now, the credit gets a boost to coincide with the president’s uber-green agenda.

“The aggregate ceiling for 2009 and 2010 combined is now $1,500,” says Bob Scharin, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters.

So that means you can do more insulating, buy an energy-efficient door or windows (including skylights), or put on a metal roof that meets the Energy Star requirements.

Or go improve your air-conditioning, heat pumps, water heaters, etc. You’ll get a credit for 30% of the money you spend on those energy-efficient improvements up to $1,500 during 2009 and 2010. Note that your total credit can’t exceed $1,500 in aggregate for 2009 and 2010.

Be sure to check out the IRS Web site at irs.gov for more details.

More Help for College Tuition 

In a nutshell, the new stimulus bill expanded the amount and availability of the already-existing Hope Scholarship credit and changed its name to the “American Opportunity Tax Credit.”

Under the law, the Hope Scholarship credit was capped at $1,800 and available for only the first two years of post-secondary education.

The new American Opportunity Tax Credit raises the credit max to $2,500 for 2009 and 2010, and now includes the first FOUR years of post-secondary education. It now also includes correspondence-course materials.

The qualifying income levels were increased as well. 

The old limits:

• Single person qualifies for the full amount up until income hits $48,000.  Then credit starts to phase out and disappears at $58,000.
• Married filing jointly qualifies for full amount up to $96,000. Then credit starts to phase out and disappears at $116,000.

Now the new limits:

• Single person qualifies for the full amount up until income hits $50,000. Then starts to phase out and disappears at $80,000.
• Married filing jointly qualifies for full amount up to $100,000. Then credit starts to phase out and disappears at $160,000. 

But heads-up! Although this credit is retroactive to Jan. 1, 2009, you have to have made your payments in 2009. If you paid tuition in 2008 for an upcoming 2009 semester, you don’t get the new perks and have to follow the old rules.

Additional Help for Commuters

Do you commute to work?  Then find out if your employer offers a mass-transit benefit.

Previously, you could exclude up to $120 per month from your taxable income for your train or bus pass or van pooling.

Now, under the new law, the amount increases to $230 starting generally in March 2009 and will be adjusted for inflation in 2010. 

The amount now coincides with the $230 you can exclude for parking fees, notes Scharin.

And hey -- if you employer doesn’t offer mass transit benefits, march down to the HR dept and demand they do!!! 

A Quick Note on the AMT

The alternative minimum tax needs to be fixed (read: abolished) and while the stimulus bill doesn’t do that, it does prevent another 26 million middle-income taxpayers would get slammed with this ornery tax.

So basically, the AMT exemption amounts were properly indexed for inflation. They call it an AMT “patch” down in Washington, DC.

But here’s your real DC Translation: the AMT brings in so much tax revenue we don’t want to get rid of it just yet.

Right.  Because we don’t pay enough tax.