Author: Leon Clinton

Tax

Do You Qualify for the Earned Income Tax Credit?

Millions of Americans forfeit critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for low-to-moderate-income individuals who work. Taxpayers who qualify and claim the credit could owe less federal tax, owe no tax, or even receive a refund.

The EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. If you have children, they must meet the relationship, age, and residency requirements. Additionally, you must be a US citizen, have a valid social security card, and file a tax return to claim the credit.

General requirements: If you were employed for at least part of 2011 and are at least age 25, but under age 65, and are not a dependent of anyone else you may be eligible for the EITC based on these general requirements:

  • You earned less than $13,660 ($18,740 if married filing jointly) and did not have any qualifying children.
  • You earned less than $36,052 ($41,132 if married filing jointly) and have one qualifying child.
  • You earned less than $40,964 ($46,044 if married filing jointly) with two or more qualifying children.
  • You earned less than $43,998 ($49,078 if married filing jointly) with three or more qualifying children.

Tax Year 2011 Maximum Credit

  • $5,751 with three or more qualifying children
  • $5,112 with two or more qualifying children
  • $3,094 with one qualifying child
  • $464 with no qualifying children

Investment income must be $3,150 or less for the year.

If you think you qualify for the EITC but aren’t sure, call our office today.

 

Financial Planning Tax

College Tax Credit – It’s Not Too Late!

It’s not too late to take advantage of the American Opportunity Tax Credit, a credit that helps parents and college students offset the cost of college. This tax credit is part of the American Recovery and Reinvestment Act of 2009 and is available through December 31, 2012. It can be claimed by eligible taxpayers for college expenses paid until 2012.

Here are six important facts about the American Opportunity Tax Credit:

  1. This credit, formerly known as the Hope Credit, has been expanded. Eligible taxpayers can claim qualified tuition and related expenses paid for higher education through 2012. Qualified tuition and related expenses include tuition, related fees, books, and other required course materials.

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  2. The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

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  3. The full credit is generally available to eligible taxpayers who make less than $80,000, or $160,000 for married couples filing jointly. The credit is gradually reduced, however, for taxpayers with incomes above these levels.

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  4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

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  5. The credit can be claimed for qualified expenses paid during any of the first four years of post-secondary education.

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  6. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to take either the credit or the deduction.

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If you would like more information about the American Opportunity Tax Credit please call us. We’re more than happy to help.

 

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