More Tax Credits for Working Families

In addition to the Earned Income Tax Credit, other federal tax credits that help lower-income working families include the child Tax Credit, Child and Dependent Care Tax Credit, Saver's Tax Credit, and education tax credits including the American Opportunity Tax Credit (formerly known as the Hope Credit) and Lifetime Learning Credit.

The Child Tax Credit

The Child Tax Credit (CTC) is a federal tax credit, worth up to $1,000 in 2012 for each qualifying child under age 17 claimed on the worker's tax return. While the CTC has been in effect since 1998, Congress made changes to the credit in 2001 that made it available to millions more low- and moderate-income working families, and provided many families a larger CTC than they could have received in the past. This "Additional CTC" is refundable, meaning some families can get the credit even if they owe no income tax. Eligible families can receive the CTC refund in a check from the IRS. Read More

The Child and Dependent Care Credit

The Child and Dependent Care Credit is a tax benefit that helps families pay for child care they need in order to work or to look for work. The credit also is available to families that must pay for the care of a spouse or an adult dependent who is incapable of caring for himself or herself. The Child and Dependent Care Credit can reduce the amount of federal income tax a family pays in two ways. For families that pay income taxes but do not owe taxes at the end of the year (because they have fully paid their taxes for the year through payroll withholding), this credit can give them back some or all of the federal taxes that were taken out of the parents' paychecks during the year. For families that end up owing taxes at the end of the year, the credit can lower the amount they must pay to the IRS. In 2012, parents can claim as much as $3,000 per child (up to $6,000 for two or more children). Please note, however, that families earning too little to pay federal income tax cannot use this credit. In this way, the Child and Dependent Care Credit differs from the Earned Income Tax Credit. The EITC can be claimed by families earning too little to pay income tax. Read More

The Saver's Tax Credit

The Saver's Tax Credit can reward workers who make contributions to a retirement plan or Individual Retirement Account (IRA). Workers can receive a tax credit worth up to 50 percent of a maximum $2,000 contribution. Married workers may each make the maximum contribution. The Saver's Tax Credit, is referred to in IRS tax forms as the "Credit for Qualified Retirement Savings Contributions". This may be particularly valuable for workers in areas where matched-savings plans, such as Individual Development Accounts (IDAs), are not available or when saving for retirement is a higher priority for a family than the uses that may qualify for matched savings in an IDA. Read More

Education Tax Credits

There are two tax credits available to persons who pay expenses for higher education. They are the American Opportunity Tax Credit and the Lifetime Learning Credit.

What is the American Opportunity Tax Credit?

The Hope Credit has been modified and expanded and is also referred to as the American Opportunity Tax Credit.  The Hope credit can help you get money back for expenses during the first 4 years of post-secondary education.

  • You can get money back for qualified education expenses (like tuition, books, supplies and equipment) for the first 4 years of college or vocational school.
  • Get up to $2,500 per eligible student, per year.
  • Each student must be enrolled in school at least half-time, for at least one academic period in 2012.
  • Each student must be working on getting a degree, certificate, or other credential.
  • You can't claim a credit for graduate and professional-level programs.
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What Is The Lifetime Learning Credit?

The Lifetime Learning Credit can help you get money back for expenses during all your years

of post-secondary education.

  • You can get money back for qualified education expenses (like tuition, books, supplies and equipment) for college, vocational school, and improving job skills.
  • There's no limit on the number of years you can claim the credit.
  • Get up to $2,000 per eligible student, per year.
  • Each student has to be enrolled in at least one course.
  • The student doesn't have to be working on getting a degree, certificate, or other credential.
  • You can claim the credit for graduate and professional-level programs.
  • Students with felony drug convictions can claim the credit.
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