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Credits
Taxpayers can reduce their income tax liability by claiming the benefit
of certain tax credits. Each dollar of tax credit offsets a dollar of tax
liability. The following are a few of the available tax credits.
Certain low income households may claim an Earned Income Credit. The
maximum Earned Income Credit for 2007 was $428 for taxpayers with no
qualifying children, $2,853 for taxpayers with one qualifying child, and
$4,716 for taxpayers with two or more qualifying children. In order to
qualify for the credit, taxpayers must have adjusted gross income of less
than $37,783 ($39,783 if married filing jointly) with two or more
qualifying children; $33,241 ($35,241 if married filing jointly) with one
qualifying child; and $12,590 ($14,590 if married filing jointly) with no
qualifying children. The earned income credit is a refundable credit.
A credit for Child and Dependent Care Expenses is available for amounts
paid to care for a qualifying child or other dependent so that the
taxpayer can work or look for work. The credit is up to 35% (depending on
adjusted gross income) of up to $3,000 of employment-related expenses for
one qualifying child or dependent and up to $6,000 of employment-related
expenses for two qualifying individuals.
The elderly and those under 65 who are retired under total disability
may be entitled to a credit of up to $750 (if single) or $1,125 (if
married and filing jointly). No credit is available if the taxpayer is
single and has adjusted gross income of $17,500 or more. Similarly, the
credit is unavailable to a married couple filing jointly if their adjusted
gross income exceeds $25,000.
Effective for tax years beginning after Dec. 1, 1997, taxpayers who
have qualifying children for whom the taxpayer may claim a dependency
exemption and who are less than 17 years old as of the close of the tax
year are entitled to the child tax credit. The amount of the credit for
2007 was $1,000. The child credit begins to phase out when AGI reaches
$110,000 for joint filers and $75,000 for singles. Taxpayers who have
three or more qualifying children may also be entitled to an additional
credit.
Information Please® Database, © 2007 Pearson
Education, Inc. All rights reserved.
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