Tax CreditsYour Money. You Earned it. Now Claim it!

Lori ZierlFamily Living Educator,

UW-Extension, Pierce County

Tax creditsO Tax credits bring extra money to

families through the tax systemO Tax credits are subtracted from your

tax liability to reduce your actual taxO They differ from a tax deduction that

reduces only your taxable income

Non-refundable tax credit

O A tax credit that can't reduce the amount of tax owed to less than zero Examples:

O Child & Dependent Care CreditO Lifetime Learning Education CreditO Child Tax CreditO Residential Energy CreditsO Retirement Savings Contribution Credit

Refundable tax creditsO Refundable means… you get cash

back if your credit is higher than your tax Examples:

O Earned Income CreditO Adoption CreditO Health Coverage Tax CreditO American Opportunity Credit (partly

refundable)

Which tax credits are we talking about today?

O Earned Income Credit (federal and state)

O Child Tax Credit (federal)O Homestead Credit (Wisconsin)O Education Tax Credits (federal)

American Opportunity Tax Credit Lifetime Learning Credit

Federal Earned Income Tax Credit (EITC)

O Must have earned incomeO Workers who qualify can receive a

refund from the IRS even if their earnings were too small to owe income taxes

For the Federal EIC, you need:O Earned income from…

salary, wages, self-employment, military pay, strike benefits, private long-term disability pay

O Total income for 2012 below limits: No kids: $13,980 ($19,190 if married) 1 child: $36,920 ($42,130 if married 2 children: $41,952 ($47,162 if

married) 3+ children: $45,060 ($50,270)

O Investment income below $3,200

You will also need to:O Have a valid Social Security number

for self, spouse and childrenO File a joint return (if married)O Be a U.S. citizen or resident alien all

year

Who is a “Qualifying Child”?O Children, stepchildren, grandchildren

and adopted childrenO Siblings, stepsiblings – as well as

descendants of such relativesO Foster child placed by agency

O Under age 19 (24 if full-time student)O Any age if permanently disabled

“Qualifying Child”O Must live with you at least 6 months

during the year (183 days for 2012)O Does NOT have to be your dependent

How much can you get?

O With no children (age 25 to 64) – up to $475

O With 1 child – up to $3,169O With 2 children – up to $5,236O With 3+ children – up to $5,891

Wisconsin EITCO If you claim the federal EIC and have

qualifying children, you qualify for the Wisconsin EIC 1 child, you get 4% of your federal EIC (up

to $127) 2 children, you get 11% (up to $576) 3+ children, you get 34% (up to $2,003)

O No Wisconsin EIC for workers without children

Claiming Earned Income Credit

O For Federal EIC: File tax form 1040 or 1040A Use Worksheet A to calculate your EIC Complete Schedule EIC (if children)

O For Wisconsin EIC: File Wisconsin tax form 1 or 1A Need federal EIC amount from

Schedule EIC

Federal Child Tax Credit

O Tax credit to offset cost of raising children

O Federal tax credit worth up to $1000 for each qualifying child under age 17

O Qualifying child same as EITCO Must earn more than $3000 in 2012O Must be able to claim child as a

dependent and claim the exemption on the return

Claiming Child Tax Credit

O File federal tax form 1040 or 1040AO Many filers also need Form 8812

(Additional Child Tax Credit form)O Must have SSN (Social Security Number) or

ITIN (Individual Taxpayer Identification Number)

O Immigrant workers with SSN or ITIN may be able to claim the CTC refund (child be either a citizen or a resident alien)

WI Homestead Tax Credit

O Wisconsin tax credit to offset cost of property taxes or rent

O Covers homeowners and rentersO Available for workers and non-

workersO Must be a legal Wisconsin resident

all yearO Must be 18 or older

WI Homestead Tax Credit

O Household income less that $24,680O Refundable – can get up to $1160

Claiming the Homestead Credit

O Complete Wisconsin Schedule H or H-EZ

O Attach property tax bill or rent certificate

O Landlord should sign rent certificateO Can submit without full tax return

If not filing WI tax return – use form 1, 1A, or 1NPR

Education Tax CreditsO Makes education more affordable to

families and students who might not otherwise be able to pursue post-secondary education

O Enables individuals to improve their job skills and increase their earning ability

O Includes: American Opportunity Tax Credit Lifetime Learning Credit

O Cannot claim both at the same time

American Opportunity Credit

O Partially refundable (40% up to $1000 is refundable)O Worth up to $2,500 per yearO Student must be pursuing undergraduate

degreeO Student must be in first four years of collegeO Must be enrolled at least half-timeO Covers qualified educational expensesO Full credit if AGI less than $80,000

($160,000 if married)

Lifetime Learning Credit

O Non-refundable tax creditO Worth up to $2,000 per yearO Student in any year of college or

courses to acquire job skillsO No degree or course study requirementO Enrolled in a minimum of one courseO Student can’t claim AOTCO AGI less than $52,000 ($104,000 if

married)

Claiming Education Tax Credits

O File form 1040 or 1040AO Complete form 8863

How Tax Credits Affect Eligibility for Public Benefits

O Tax refunds are not counted as income in determining eligibility for any federally-funded public benefits

O Amounts saved from tax refunds are not counted toward resource limits in public benefit programs for 12 months after the refund is received

Where to Find Tax Forms

O UW-Extension tax credit website: http://fyi.uwex.edu/eitc/

O IRS (federal tax forms): www.irs.ustreas.gov or www.irs.gov

O Wisconsin Dept. of Revenue (state tax forms): www.dor.state.wi.us

You’ve Got your Refund…

Now What?O2 General “Do” Rules

Plan ahead before spending. Devote a portion toward long-term

financial security.

Smart UsesO Pay down debtO Save for special eventsO “Sometimes” savingsO Save for emergenciesO InvestO Generate tax creditsO Long-term savingsO Special purchases

What Not To DoO Don’t throw away part of your money on

“loan” fees just to get your refund faster.O Don’t use your refund to generate more

debt.O Don’t spend your refund on small

personal or household items.O Don’t loan your refund to someone else.O Don’t use your refund to sustain an

unsustainable lifestyle.

Avoid a Tax RefundO A tax refund is the return of your

earned income to you.O It is not free money or a gift from the

government.

Contributors O Kristi Cutts, Family Living Educator

UW-Extension, Winnebago County

O Ruth Schriefer, Family Living Educator UW-Extension, Iowa County

O Judi Bartfeld, Professor (Reviewer) Food Security Research and Policy

Specialist UW-Extension and UW-Madison

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Lori ZierlFamily Living Educator

UW-Extension, Pierce CountyPierce County Office Building412 West Kinne Street, P.O. Box 69Ellsworth, WI 54011715-273-6781

University of Wisconsin-Extension, U.S. Dept. of Agriculture and Wisconsin counties cooperating. UW-Extension provides equal opportunities in employment and

programming, including Title IX and ADA.