Changes With Income Tax Credits
With the economy still in its lackluster mode, many believe the worst is still in front of us. Unfortunately, as
we head into the New Year, there is a wide range of adverse tax changes that pertain to tax credits, tax deductions,
sales taxes, and other tax rates you should know about. Having a better understanding of what tax law changes are
coming can help you plan ahead to potentially lower your tax liabilities. Many of these projections are based of off
Obama’s proposed budget.
A lot of changes may be up in the air, but you can be pretty sure that on the whole taxes are going up! Although this
list is not all inclusive, the major changes that could impact you are detailed below.
- Child Tax Credit Reduced. In 2011, the child tax credit will be cut in half to $500 per child and may not even be applicable to all taxpayers. For those filing jointly, the tax credit begins to phase out at $110,000 (AGI) and for taxpayers completing a single tax return at $75,000. While President Obama has mentioned the possibility of increasing this tax credit for families that fall under the middle class, no action has thus far been taken.
- Making Work Pay Tax Credit Gone. This year workers are able to get a tax credit for 6.2% of their earned income with a maximum credit of $400 for single filers and $800 for married couples. In 2011, this tax credit will be eliminated unless Congress acts as Obama’s proposal seeks to extend this credit in 2011.
- Earned Income Tax Credit Reduced for Some. This is a tax credit for low-income working families with earned income less than or equal to $48,362. The income limits on this credit vary by your filing status and by the number of children you claim as dependents. In 2011, the EITC is expected to decrease for families with three or more children with higher income phase outs eliminated.
- Hope Tax Credit Changed. This tax credit goes back to being only applicable for the first 2 years of college and the limit goes from being $2500 to $1800. Of course there are income limits as well with this credit. Obama has stated he wants to make the changes with this tax credit in 2010 permanent but nothing is set in stone yet.
- Energy-Saving Credits Gone. The current 2010 credit for principal residence homes making changes to housing insulation, windows, doors, HVAC equipment, water heaters and more will expire next year. This tax credit allowed up to 30% ($1.5k max limit) back with applicable energy efficiency improvements.
- Homebuyer Tax Credit for Veterans. If you or your spouse are part of the Armed Forces, Military Intelligence or Foreign Service and have been engaged in activity duty for at least 90 days outside of the United States you have until April 30th, 2011 to sign a real estate contract and close by at least June 30th, 2011. Be sure to make note of this date if you intend on purchasing a house and claiming this credit