Tax Credits To Be Aware Of

This tax season there are a number of special tax credits that have been made available. Be sure to know which ones you are eligible for.

Federal Housing

This one is an $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers. It has expired, but service members that were on extended duty outside of the United States for at least 90 days between Jan.1, 2009 and May 1, 2010, can still qualify for a one-year extension.

Energy Efficiency

The purchase of energy star appliances or making energy saving improvements to a taxpayers home can result in savings. The former amounts were 30% up to $1,500. This expired on December 31, 2010. Now the tax credit has been changed for 2011 to 10% of cost up to $500 or a specific amount from $50 – $300

Mortgage interest

This one is a nonrefundable credit that may be limited to $2,000, granted under specific mortgage programs.

Adoption

This credit up can be up to $10,000, but is phased out at higher incomes. Particulars on how to file for it can be found here at the IRS website.

Excess Social Security and RRTA Tax Withholding

This credit functions much like the ever popular Earned Income. If an employer withheld Social Security taxes from wages paid to an employee during the year and they must also match the tax withheld from the employee’s wages.

Retirement Savings Contribution

This credit is a nonrefundable credit of up to 50% of contributions to IRAs or similar plans. It is however, phased out at incomes above $16,000 ($24,000 for head of household and $32,000 for joint returns).

Earned Income

A refundable credit granted for a percentage of income earned by a low income individual, the Earned Income credit is calculated and capped based on the number of qualifying children, if any. This credit is indexed for inflation and phased out for incomes above a certain amount. Here are the amounts:

• You have three or more qualifying children and you earn less than $43,352 ($48,362 if married filing jointly),
• You have two qualifying children and you earn less than $40,363 ($45,373 is married filing jointly),
• You have one qualifying child and you earn less than $35,535 ($40,545 if married filing jointly), or
• You do not have a qualifying child and you earn less than $13,460 ($18,470 if married filing jointly).

The most a taxpayer can collect is:

• $3,050 if you have one qualifying child,
• $5,036 if you have two qualifying children,
• $5,666 if you have three or more qualifying children, or
• $457 if you do not have a qualifying child.

Child and Dependent Care

A nonrefundable family based credit, the taxpayer gets up to $1,000 for a qualifying child. Dependent care can be a 20-35% of such costs against the taxpayer’s federal income tax liability, but is phased out when the AGI is over $15,000.