Federal Tax Credits
It's tax season, so we'll try to be brief (yeh, right Abo)
Here are some federal tax credits that help Abo and Company increase your 2011 refund:
1. The Earned Income Tax Credit is for people earning less than $49,078 from wages, self-employment or farming. Millions of workers who saw their earnings drop in 2011 may qualify for the first time. Income, age and the number of qualifying children determine the amount of the credit, which can be up to $5,751. Workers without children also may qualify.
2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work.
3. The Child Tax Credit is for people who have a qualifying child. The maximum credit is $1,000 for each qualifying child. You can claim this credit in addition to the Child and Dependent Care Credit.
4. The Retirement Savings Contributions Credit is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply.
5. The American Opportunity Tax Credit expanded and renamed the already-existing Hope scholarship credit for higher education costs. It can be claimed for expenses paid for tuition, certain fees and course materials. It is a tax credit of up to $2,500 of the cost of tuition, fees and course materials paid during the taxable year. Also, 40% of the credit (up to $1,000) is refundable. This means you can get it even if you owe no tax. Generally, a taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student.
6. The Adoption Credit, the largest refundable tax credit available to individuals, enables taxpayers to take up to $13,360 for qualified expenses paid to adopt an eligible child. (While an Abo child will not qualify, Marty may offer a personal incentive for anyone who closes The Bank of Dad to his two sons).
7. The Foreign Tax Credit offers individuals a federal tax credit for income tax paid to a foreign country (with certain limitations and paid to countries that are recognized by the United States and do not support terrorism).
8. The Nonbusiness Energy Property Credit is available to individuals for the installation of nonbusiness energy property, such as residential exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners, and water heaters. There is a $500 maximum lifetime credit but it is available for qualifying expenditures made before 1/1/2012 so why not take advantage of it.
Please appreciate that a tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are actually refundable meaning if you are eligible and claim one, you can get the rest of it in the form of a tax refund even after your tax liability has been reduced to zero.
Okay, back to taxes and litigation reports. Many happy returns!