Tax Tips For Low-Income Families
There is little doubt that living as a low-income family comes with its own set of challenges. At tax time, low-income filers can take advantage of tax credits and deductions that reduce or eliminate their Federal Tax liability. In many cases, low-income tax filers even qualify for a tax refund.
These deductions and tax credits help provide financial assistance to individuals and families who meet specific income requirements, based on family size and other factors.
Earned Income Tax Credit – The Earned Income Tax Credit (EITC) is especially helpful for low to middle-income individuals and families at tax time. The EITC is a ‘refundable’ credit, meaning that the qualifying funds are ‘refunded’ even if you owe taxes.
For instance, let’s say you owe $250.00 in taxes and you get an EITC of $1,000, you’ll receive $750.00.
The amount of the Earned Income Tax Credit you qualify for varies based on factors including your marital status and the number of eligible children or dependents in your household. In 2017, qualifying tax filers with no children are eligible to collect $510 in EITC. Individuals or families with three or more qualifying children are eligible for $6,318. People with two qualifying children get $5,616 in EITC. Families and individuals with one qualifying child get $3,400 EITC.
One of the most significant advantages of the EITC for low-income filers is that all EITC that gets refunded doesn’t get counted as Federal Taxable Income. Other Federal benefits including Medicaid, Food Assistance, SSI (Supplemental Security Income), Low Income Housing, and Cash Assistance Programs are subject to taxation.
As you can imagine, these credits can make a sizeable financial impact for those who qualify for them.
Get more detail on tax credits here.
Tax Credits for the Elderly and Disabled – Unfortunately, the elderly and disabled are often low-income taxpayers, but tax credits help alleviate some of the financial and tax burdens. Qualifying individuals must meet income requirements in addition to other criteria. Tax filers must be age 65 or older at the end of the year and have retired as a result of total and permanent disability, as well as had a taxable disability income to qualify for these tax credits.
IRA and Retirement Credits – As a low-income filer, it might be difficult to think about tucking money away for the day when you eventually plan on retiring. The truth is that Federal Tax Code allows tax-filers to file deductions for qualifying contributions to their IRA or their employer-sponsored retirement accounts. Eligibility for these credits is based on a number of factors including your annual gross income and marital status.
When tax time arrives, it’s always worth claiming all the tax credits and deductions you and your family qualify to claim. Regardless of how you decide to file your taxes (electronically, through a tax professional, or through an EZ form) you want to make sure that you’re taking advantage of all the deductions and tax credits that are available to you to lessen your tax responsibilities and maybe even get a welcome tax refund.