TAX CREDITS

EARNED INCOME CREDIT

If you worked at any time during the tax year, you may be eligible for the Earned Income Credit (EIC).  If so, you will owe less in taxes, and you could get cash back.  You can get the EIC even if you do not owe income tax. Although you do not have to be raising children to get the credit, the amount of the credit is much larger for taxpayers with children.

To get the child-related EIC, you must meet basic requirements, including:

• Your earnings for the year were below a certain amount (for tax year 2010, adjusted gross income of $40,363 if you have two qualifying children ($45373 for married taxpayers filing jointly)
• You were raising a child in your home for at least half of the tax year
• The child is your son, daughter, adopted child, grandchild, step-child, sibling or step-sibling or the descendant of such relative (e.g. your niece or grand-nephew), or a foster child placed in your home by an authorized placement agency
• The child is under 19, or under 24 and a full-time student; a child with a total and permanent disability can qualify at any age
• Your investment income was below a certain amount ($3,100 for tax year 2010).

How do I claim the credit?

If you were raising children in the tax year, file federal tax return forms 1040 or 1040A, not Form 1040EZ.  Be sure to attach Schedule EIC.

How much credit can I get?

This depends on the number of children and your income.  For tax year 2010, if you have one qualifying child you can receive a maximum credit of $3,050. For two or more qualifying children, the maximum credit is $5,036.  Get forms and printed information from the IRS by calling 1-800-829-3676 (1-800-TAX-FORM).  For answers to tax-related questions, call the IRS at 1-800-829-1040.

CHILD TAX CREDIT

This credit is worth up to $1000 per child in tax year 2010.   Here are the basic requirements:

• The child is under 17 years old;
  
• The child lived with you in the US for more than half the year;
  
• You must be related to the child (same as relationship criteria for EIC; see above) 
  
• You do not have to claim the child as a dependent in order to claim this credit.  However, if a court order (e.g. a divorce decree) gives this credit to one of the child’s parents, only that parent can claim this credit.

CHILD AND DEPENDENT CARE CREDIT

The Child and Dependent Care Credit is a tax benefit that helps you pay for childcare you need in order to work or look for work.  You can also claim this credit if you pay for the care of a spouse or an adult dependent who cannot care for him or herself.  Generally, you must claim the child as your dependent in order to get this credit; however, there are special rules for children of divorced or separated parents.

For tax year 2010, the maximum amount of work-related expenses you can use to figure the  federal credit is $3,000 for families with one dependent; $6,000 for families with more than one dependent.

You can claim this credit if:

• You paid for care for a “qualifying child” under age 13, or for a dependent disabled adult, who lived with your family for more than half the tax year, and
  
• You needed the child or dependent care in order to work or look for work (and your spouse was also unavailable to provide care) and
  
• You paid less for your dependent care than you earned. (If you are married and filing jointly, the income of the spouse with the lowest income will be used.  There are special rules for figuring the income of a spouse who was a full-time student or disabled.)

You can claim this credit in addition to the EIC and the Child Tax Credit.  However, this credit is not “refundable;” if you earn too little to pay federal income tax, you cannot get this credit.

How do I claim the credit?

File Form 1040, or Form 1040A, along with Form 2441.  Specific  instructions on the credit are included with the forms.

The State of Maine also provides a Child and Dependent Care Tax Credit. This credit is “refundable,” so, unlike the federal credit, you can claim it even if you didn’t earn enough to pay income tax. This state credit is refundable up to $500 in tax year 2010. If the child is enrolled in a childcare center or home with a Quality Certificate, you will be eligible for a double credit (50% of the federal credit).  Ask your childcare provider if they have a Quality Certificate.  If they do, ask them for the 3-digit number on their Quality Certificate and be sure to write this number on your Maine Income Tax Return.

FREE TAX FILING AND MORE INFORMATION

For more information about tax credits, free filing options, and other tax tips, go to Pine Tree Legal Assistance's website

The Pine Tree Legal Assistance Low Income Tax Clinic provides information and education to taxpayers.  It also provides assistance to people in tax “controversies” such as denials and audits.  Call 942-8341 for more information.

VITA is an IRS program that helps people fill out their tax forms for free.  To find the VITA site near you, call 1-800-829-1040.  Be patient – the line is often busy.

PROPERTY TAX AND RENT REFUND PROGRAM

This program - sometimes called the “circuit breaker” program - is for qualified Maine homeowners and renters.  Eligibility and the refund amount are based on your income and the percent of income you spent on property tax or rent.  There are special eligibility rules if you are elderly and have a low income.  The maximum refund is $1600.  Multi-member households with up to $86,600 annual income, and high property taxes or rental charges, can now qualify.

To apply, fill out the Tax and Rent Refund Application form.  You may be able to get the form from your town office or the Maine Revenue Services at 624-7894. You can also download an application or file online.  You can apply each year between August 1 and May 31.