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Tax Credits for Families

|Parents And Guardians - Are You Aware Articles

March 09, 2010

Once again, April 15 is sneaking up on us. Many people will be rushing to file their 2009 taxes. Are you aware of what filing your taxes might mean for your family? There are many credits taxpayers may take for various life events that often go overlooked. Below are just a few credits specifically for families listed on the Internal Revenue Service Web site (www.irs.gov).

Earned Income Tax Credit
The Earned Income Tax Credit (EITC), sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for working individuals and families who earn low incomes. Congress originally approved the tax credit legislation in 1975, in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. The EITC may be for you, if:

  1. You are married and your combined salary is less than:
    • $48,279 a year (and you have three or more qualifying children)
    • $45,295 a year (and you have two qualifying children)
    • $40,463 a year (and you have one qualifying child)
    • $18,440 a year (and you have no children)
  2. You are single and your yearly salary is less than:
    • $43,279 a year (and you have three or more qualifying children)
    • $40,295 a year (and you have two qualifying children)
    • $35,463 a year (and you have one qualifying child)
    • $13,440 a year (and you have no children)

To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.

The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments

Child and Dependent Care Credit If you paid someone to care for a child under age 13 so you could work, you may be able to reduce your tax by claiming the credit for child and dependent care expenses on your federal income tax return. The credit is also available if you paid for care of a spouse or a dependent of any age that is physically or mentally incapable of self-care.

The credit is a percentage, based on your adjusted gross income, of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can range from 20 to 35 percent of your qualifying expenses, depending on your income.

Child Tax Credit
With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under age 17. A qualifying child for this credit is someone who:

  1. Is claimed as your dependent
  2. Was under age 17 at the end of 2009
  3. Resided with you for more than half of 2009
  4. Did not provide over half of his or her own support for 2009
  5. Is your son, daughter, adopted child, grandchild, stepchild or eligible foster child, your sibling, stepsibling, or their descendant
  6. Is a U.S. citizen, U.S. national or resident alien

 The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:

  • Married Filing Jointly $110,000
  • Married Filing Separately $55,000
  • All others $75,000

For more information on these and other tax credits and update for 2009, go to www.irs.gov or the following resources:

Volunteer Income Tax Assistance: A free assistance program, run by the IRS and staffed by volunteers. 1-800-829-1040 or www.irs.gov

National Women’s Law Center: 202-588-5180 or www.nwlc.org

Center for Budget and Policy Priorities: 202-408-1080 or www.cbpp.org


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