Different Types of Credits to be Aware of While Filing Taxes
Posted on 02/09/2007, 05:39
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Credits Social Security Credit
Credits
- Social Security Credit
You begin earning Social Security Credits when you start working in a job that has Social Security benefits
The credits needed for the different benefits follow:
- For retirement benefits, 40 credits are required (if born after 1929). For disability benefits, the number of credits depends on the age. In general, people under 24 need six credits, but above that the credits vary with age. Survivor benefits depend on the person's birth year; people born in or before 1929 need one credit for each year after 1950 until their death and for those born after 1930, one credit is needed for each year after age 21 until their death. Medicare eligibility also depends on the number of Social Security credits.
When you retire you can start receiving Social Security benefits right away, however, if you delay those benefits, you can get a social security credit of 5.5% for each year you delay the payments.
Earned Income Tax Credit
The earned income tax credit (EIC) is a relief from the Social Security tax for working, low-income people. Any amount of the credit that exceeds the taxpayer's tax liability is refundable. Single or married people who worked full-time or part-time at some point in 2002 can qualify for the EIC, depending on their income. Workers who were raising one child in their home and had family income of less than $29,201 (or $30,201 for married workers) in 2002 can get an EIC of up to $2,506. Workers who were raising more than one child in their home and had family income of less than $33,178 (or $34,178 for married workers) in 2002 can get an EIC of up to $4,140. Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2002, and had income below $11,060 (or $12,060 for married workers) can get an EIC of up to $376. Children must be under 19 and living with you in order to qualify for this credit.
Education Credits
Education credits can provide up to $1,500 per student as a direct reduction of your taxes .
HOPE Credit
The HOPE Credit can be claimed during the first two years of post-secondary education of a dependent. The amount of the credit is 100% of the first $1,000 of tuition and other school-related expenses, plus 50% of the next $1,000 of tuition and other school-related expenses. This credit phases out at a modified AGI between $40,000 and $50,000 for single persons, or between $80,000 and $100,000 for married couples filing jointly. Married couples filing separately cannot claim this credit.
Lifetime Learning Credit
The Lifetime Learning Credit allows you to apply 20% of up to $5,000 in tuition and fees, for a maximum credit of $1,000.
Adoption Credit
Child adoption has a tax credit of $5,000 up to $10,000 for adoptions finalized in 2002. If the adoption is a special needs child certified by the state, the requirement of 'qualifying expenses' will be eliminated. In other words, beginning in January 2003, all taxpayers who complete an adoption that includes adoption assistance will qualify for a full $10,000 tax credit even if they had zero expenses. The credit phases out at an AGI of $150,000 and is unavailable if your AGI exceeds $190,000.
Child and Dependent Care Credit
If you work, your childcare expenses are not subject to income tax, social security tax or Medicare tax for up to $5,000. The credit entitles you to a maximum of $2,400 for one child or $4,800 for two or more children. You cannot make claims if the person taking care of your child or children is a child under 19 or anyone you claim as a dependent.
Dependent Care Credit
You can take a dependent care credit if you are caring for a disabled person who is unable to take care of himself or herself.
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