SD 2 - Establishing a Budget which addresses financial
Download
Report
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
2
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
3
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
5
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
6
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
7
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
8
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
9
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.
11
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.
12
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
14
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
15
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
16
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
17