With all the hoopla about the one-time rebates that most taxpayers will receive starting in May, it might be easy to overlook a valuable tax benefit for workers with modest incomes.
It’s available tax year in and tax year out, and could reduce or even eliminate any federal income taxes they owe. For some folks, it even provides a refund of hundreds of dollars. You know, just like the much-talked-about rebates will do.
This tax benefit has a name that’s hard to remember and requirements that are a challenge to understand: the Earned Income Tax Credit.
But its value to certain families is undeniable.
For example, a single working mother with young children who earned less than $37,783 in 2007 could qualify for a credit of as much as $4,716. For detailed information, check out this article on the Earned Income Credit.
To qualify, you must be between the ages of 25 and 65 and you must have income from working that is less than:
- $12,590 if single, $14,590 if married with no children
- $33,241 if single, $35,241 if married, with one child
- $37,783 if single, $39,783 if married, with two or more children
The maximum credits available:
- $428 for taxpayers with no children
- $2,853 for taxpayers with one child
- $4,716 for taxpayers with more than one child
If you take the credit, you’ll have lots of company. More than 22.4 million taxpayers shared in $43.7 billion dollars in Earned Income Credits in 2007. Those who took the credit accounted for 18 percent of the 124 million tax returns filed.
Even so, the IRS estimates that 20 to 25 percent of those eligible for the credit don’t claim it. That’s at least 5.6 million people missing out on hundreds of dollars each tax season.
For those who qualify, TurboTax offers free tax-preparation software and e-filing for federal tax returns and for certain state returns. Visit this site for more information or to get started.
In 2008, many workers who qualify for the credit should be doubly rewarded for filing a tax return. First off, they’ll get their credits. And then, if they have earned income of more than $3,000, they could also qualify for a rebate of at least $300 per person or $600 per married couples and $300 per child. Good things can come to those who file.