When households are struggling to make ends meet, build savings and plan for retirement, being hit with a tax bill can hinder their goals. While Americans should never shirk their tax responsibilities, there are ways they can lower their liability. Low-income families may be eligible for a number of benefits in the form of credits and deductions, which can lower their tax bill on a dollar-for-dollar basis, or reduce their taxable income.
The Earned Income Credit is one of the most beneficial, but underutilized, tax breaks available to families who don't have a high income threshold. To qualify for the benefit for the 2012 tax year, individuals must have an earned income and adjusted gross income that is less than $45,060 - or $50,270, if married filing jointly - with three or more qualifying children. The threshold drops to $41,952 - or $47,162 for married filing jointly - with two qualifying children. Individuals with one qualifying child must earn less than $36,920 or $42,130 if married filing jointly. Lastly, the income stipulations for taxpayers with no qualifying children is $13,980 or $19,190 if married filing jointly.
In addition, investment income must not exceed $3,200 per year. The maximum credits eligible individuals may earn are as follows: $5,891 for three or more qualifying children; $5,236 with two qualifying children; $3,169 with one qualifying child, or $475 with no qualifying children.
Housing costs are typically among the largest expenses Americans are responsible for, and homeowners may be eligible for the mortgage interest credit if they have purchased their home through a special program in which they receive a Mortgage Credit Certificate from their state or local government, according to Fox Business.
Lastly, individuals may also qualify for the Retirement Savings Contribution credit. To be eligible for the 2012 tax year, married couples filing jointly must not have an adjusted gross income that exceeds $57,500. This benchmark falls to $43,125 for head of household filers and $28,750 for single filers and qualifying widow or widower.
Americans facing economic hardship or who are in the low-income bracket should consult with their tax preparer
about other benefits for which they may be eligible.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,” and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.