Tax credits that add up
Tax season is upon us and before filing taxes, be sure to check if you qualify for tax credits.
“Many families have reduced income this year and may qualify for credits they haven’t considered in the past,” said Kathy Sweedler, University of Illinois Extension Educator.
Tax credits are important because they can increase refunds or reduce the tax owed.
For example, the Earned Income Tax Credit (EITC) is for people who work for a living but don’t make a lot of money. If your financial, marital or parental status changed this year, you should definitely check if you qualify. You may qualify if your income was under $49,078 in 2011 and if you meet some other requirements. The amount of your EITC could be as much as $5,751; the credit depends on how much you earned, your filing status, whether you have children, etc.
Even if you don’t owe income taxes, you may receive money from the US government if you file a federal income tax return to claim this credit. To get the EITC you earned, you must 1) file a federal income tax return and 2) claim the EITC. Find more information at www.irs.gov/ and search for EITC. Or, call 1-800-829-1040 for information.
Check to see if you qualify for the Child Tax Credit too. Tax filers with children and incomes up to $110,000 for married filing jointly and $75,000 for single or head of household may be eligible for the Child Tax Credit, worth up to $1,000 per child.
If you paid someone to care for your child, or another family member, you may be able to claim the Child and Dependent Care Credit.
You don’t even have to pay anyone to prepare your tax return to get these credits. To find a VITA location where low-income workers can get their taxes prepared for free by trained volunteers, call 1-800-906-9887.
“Once you receive your tax refund, think carefully about how you want to use this money,” suggests Sweedler.
Before the money disappears for day-to-day expenses, consider these options:
• Pay past due expenses.
• Pay down credit card debt.
• Set aside some of your refund as an emergency fund.
• Save for your child’s education.
• Save for a major appliance or other large purchase.
• Boost your retirement funds.
• Pay down a mortgage or save for a down payment on a home.