Federal income tax credits
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Federal Income Tax Credits. Tax Credits. $ for $ reduction in amount of income tax owed Unlike deductions where the benefit depends on your marginal tax bracket SOME credits are refundable you can get $ back even if you do not owe taxes must file a tax return to collect.

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PowerPoint Slideshow about 'Federal Income Tax Credits' - Renfred


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Tax Credits

  • $ for $ reduction in amount of income tax owed

  • Unlike deductions where the benefit depends on your marginal tax bracket

  • SOME credits are refundable

    • you can get $ back even if you do not owe taxes

    • must file a tax return to collect


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Objectives (be able to):

  • 1. explain EITC & child & dependent care credit

  • 2. determine eligibility for EITC & Child Credit

  • 3. know approximate dollar amounts of EITC and maximum income amounts

  • 4. estimate EITC payments using the online calculator or print table

  • 5. explain the impact of EITC on eligibility for food stamps, Medicaid & public housing

  • 6. list main criteria for eligible children

  • 7. describe the Advance EITC and how to apply

  • 8. know if full-time college students are eligible



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Earned Income Tax Credit for Low Income Workers

  • Credit

    • $ for $ reduction in tax

  • Refundable credit

    • allows refund > amount of tax due

    • may qualify even if you don’t owe taxes

    • must file a tax return to collect EITC


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EITC

  • Amount of credit based on income (AGI) & family size

  • Must file tax return to claim the credit

    • Even if you don’t owe taxes

  • Can arrange Advance payments

    • don’t need to wait until end of tax year

    • receive monthly payments instead


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EITC Eligibility

  • Must be employed

  • Must have valid SS#

  • Lots of rules apply

  • 2007 maximum income

    • $39,783 if married filing jointly (> 1 kid)

    • $14,590 if married filing jointly (no kids)

    • $12,590 if single, no eligible children


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  • Do you Qualify?

    • http://www.irs.gov/individuals/article/0,,id=96406,00.html

  • Outreach Kit

    • http://www.cbpp.org/eic2008/

  • EITC Estimator

    • http://www.cbpp.org/eic2007/calculator/eitcchoose.htm


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EITC Summary

  • Income tax credit for low income workers

  • Advance EITC

    • Don’t wait until end of year to collect

  • Underutilized- lots of eligible workers fail to claim the credit

  • Some states (Not UT) offer EITC



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Child & Dependent Care Credit

  • Parents can claim up to $3,000 in dependent care expenses per child (or adult)

    • up to $6,000 for two or more children

    • Unlike EITC, child care credit is NOT refundable

      • families earning too little to pay federal income tax cannot use this credit

    • The EIC and CTC do not affect a family’s eligibility for child care credit.


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Amount of Child Care Credit

  • depends on

    • the number of children or dependents in care,

    • a family’s income, and

    • the amount the family paid for care during the year.

  • It can be as much as

    • $1,050 for families with one child or dependent in care

    • $2,100 for families with more than one child or dependent in care.



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Hope Credit & Lifetime Learning Credit

  • Not refundable (must owe taxes to benefit)

  • Pay for qualified education expenses for self, spouse, or dependents

    • Tuition and fees

    • Colleges and vocational schools

  • 2007 AGI <$57,000 ($112,000 if married)

  • Claim one or the other, not both


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Hope Credit

  • Student in 1st or 2nd year of college

    • Pursuing undergraduate degree

  • 100% of the first $1,100 eligible expenses

  • +50% of the next $1,100

  • Maximum credit is $1,650


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Lifetime Learning Credit

  • any point in post-secondary education

    • don’t need to be seeking degree

  • 40% of the first $10,000 of eligible expenses

  • maximum credit is $2,000/ household,

    • credit is per household, not per student

  • IRS Form 8863 for LLC or Hope


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More Tax Credit Info

  • http://www.cbpp.org/eic2008/additional-credits.htm

    • Child & dependent care credit

    • Saver’s Credit

    • Roth IRAs

    • Education Tax Credits

    • IRS Split refund policy


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