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Federal Income Tax Credits - PowerPoint PPT Presentation


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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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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
objectives be able to
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
earned income tax credit for low income workers
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
slide6
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
eitc eligibility
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
slide8
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
eitc summary
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
child dependent care credit11
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.
amount of child care credit
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.
hope credit lifetime learning credit
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
hope credit
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
lifetime learning credit
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
more tax credit info
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