- Days left

Making Work Pay Credit not likely to be extended

U.S. Capitol buildingCongress' effort to stimulate the economy included pushing through a series of tax breaks in 2009. The centerpiece of the legislation was the Making Work Pay Credit, which was intended to provide tax relief for working and middle class families. It may not last beyond this year.

The idea was to allow more taxpayers to have cash in their pocket during the year, as opposed to at tax time, by adjusting the amount of earned income withholding.



Under the current legislation, the maximum allowable credit is $400 for individuals and $800 for married taxpayers filing joint returns. The credit is figured at a rate of 6.2% of earned income. It phases out for individual taxpayers with modified adjusted gross income over $75,000 -- or $150,000 for married couples filing jointly; the phase out is at 2%, which means taxpayers who earn more than those limits still qualify for the credit, but will not receive the full amount. The credit is also refundable, so if you are due a credit that's larger than your tax liability, you qualify for a refund.

That's the good news. The bad news is that those taxpayers who benefited from the Making Work Pay Credit in 2009 and 2010 tax years should enjoy the extra dollars now, because the credit is likely not being extended to 2011 or beyond. As Congress battles it out over extending the Bush tax cuts, they also have to consider the cost of extending other tax credits. The Making Work Pay Credit is expected to cost an additional $600 billion over 10 years. The argument against extending the credit is that it's simply too expensive. Those in favor of extending the credit point out that the primary audience, the working middle class, has been the hardest hit during the recession.

It's not just a question of economics; it also boils down to political capital. The push to extend the so-called "Bush tax cuts" has gathered momentum over the past few months, while the notion of extending the "Obama tax cuts" has barely garnered any attention at all. The only thing that is clear is, semantics and politics aside, taxes are likely edging up next year.

Increase your money and finance knowledge from home

Intro to different retirement accounts

What does it mean to have a 401(k)? IRA?

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

TurboTax Articles

Ways To Increase Your Tax Refund You Never Thought About

Laying the groundwork for a tax refund requires some simple tax planning, a little research and some forethought. Reviewing your tax status, consulting your spouse when filling out your W-4s and taking advantage of several tax credits can help you increase your tax refund. TurboTax also can help decide which credits can get you the biggest refund.

What Extra Tax Deductions Should I Make Sure To Take?

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

9 Things You Didn't Know Were Tax Deductions

Few realizations are more painful than realizing that you forgot to include a tax deduction that would have lowered your tax bill or increased your tax refund on your tax return. Here are some tax deductions that you shouldn't overlook.

Add a Comment

*0 / 3000 Character Maximum