Transcript SD 2 - Establishing a Budget which addresses financial

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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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 (EITC)
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=96
406,00.html
 Outreach Kit
http://www.cbpp.org/eic2008/
EITC Estimator
http://www.cbpp.org/eic2007/calculator/eitcch
oose.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
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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Post-Secondary Education
Tax Credits
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/additionalcredits.htm
 Child & dependent care credit
 Saver’s Credit
 Roth IRAs
 Education Tax Credits
 IRS Split refund policy
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