The American Recovery & Reinvestment Act (ARRA) temporarily expands two existing tax credits for families: the Earned Income Tax Credit and the Additional Child Tax Credit. Starting in the 2009 tax year, the temporary changes will make more families eligible and they will receive more money.
The Earned Income Tax Credit
The existing law allows individuals and couples with two or more
children to qualify for an earned income tax credit of 40% of the
family’s first $12,570 of earned income. The credit is available to
individuals with less than $16,420 of gross income and to couples with
less than $19,540 of gross income.
The ARRA increases the earned income tax
credit from 40% to 45%. For couples filing jointly, the gross income
cap increases from $19,540 to $21,420.
Additional Child Tax Credit
More families with children will be eligible for the refundable portion of the Additional Child Tax Credit. In the 2009 tax year, families qualify if their taxable earned income is more than $3,000. That’s a big change from the the 2008 tax year, when the threshold was $8,500.
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