Individual income tax credits Tax credit

1 individual income tax credits

1.1 low income subsidies

1.1.1 united kingdom
1.1.2 united states


1.2 family relief
1.3 education, energy , other subsidies

individual income tax credits

income tax systems grant variety of credits individuals. these typically include credits available taxpayers tax credits unique individuals. credits may offered single year only.

low income subsidies

several income tax systems provide income subsidies lower income individuals way of credit. these credits may based on income, family status, work status, or other factors. such credits refundable when total credits exceed tax liability.

united kingdom

in united kingdom, child tax credit , working tax credit paid directly claimant s bank account or post office card account. in exceptional circumstances, these can paid cashcheque (sometimes called giro) payments may stop if account details not provided. minimum level of child tax credits payable individuals or couples children, income limit. actual amount of child tax credits person may receive depends on these factors: level of income, number of children have, whether children receiving disability living allowance , education status of children on 16.

working tax credit paid single low earners or without children aged 25 or on , working on 30 hours per week , couples without children, @ least 1 of whom on 25, provided @ least 1 of them working 30 hours week. if claimant has children may claim working tax credit age 16 upward provided working @ least sixteen hours per week.

tax credits capped many sources claim affects poorest families disproportionately. survey end child poverty estimated 1.5 million parents have reduced spending on basics food , fuel. according gavin kelly of resolution foundation, tax credits raise living standards of low paid workers. wrote in new statesman, perhaps biggest misconception voguish notion if tax credits cut, employers somehow decide offer pay rises fill gap. saloon-bar economics espoused on both left , right.

on 15 september 2015, house of commons voted decrease tax credit thresholds, law came effect on 6 april 2016. opponents claimed harm on low incomes. simon hopkins, chief executive of charity turn2us commented today s vote in house of commons mean 1 thing many of poorest working families in uk; going poorer. tax credits vital source of income on low wage , many make substantial portion of monthly income.

the ifs supported opposition view effects of changes disproportionately reduce income of poor families, taking account reductions in income tax , increase in national living wage. government responded tax credit system had, long, been used subsidise low pay , changes bring total expenditure on tax credits down more sustainable levels seen in 2007–08.

on 26 october 2015 house of lords supported motion baroness meacher delaying imposition of cuts until new consideration of effects made house of commons.

united states

the u.s. system grants following low income tax credits:

earned income credit: refundable credit granted percentage of income earned low income individual. credit calculated , capped based on number of qualifying children, if any. credit indexed inflation , phased out incomes above amount. 2016, maximum credit $6,269 taxpayers 3 or more qualifying children.
credit elderly , disabled: nonrefundable credit $1,125.
retirement savings contribution credit: nonrefundable credit of 50% $2000 of contributions qualified retirement savings plans, such iras (including roth, sep , ira), 401(k)/403(b)/457 plans , thrift savings plan; phased out starting (for 2014 tax year) @ incomes above $18,000 single returns, $27,000 heads of household, , $36,000 joint returns.
mortgage interest credit: nonrefundable credit may limited $2,000, granted under specific mortgage programs.
premium tax credit: refundable credit provided individuals , families obtain healthcare insurance policies through healthcare exchange, , income falls between 100% , 400% of applicable federal poverty line. first introduced in 2014 tax year.

family relief

some systems grant tax credits families children. these credits may on per child basis or credit child care expenses.

the u.s. system offers following nonrefundable family related income tax credits (in addition tax deduction each dependent child):

child credit: parents of children under age 17 @ end of tax year may qualify credit $1,000 per qualifying child. credit dollar-for-dollar reduction of tax liability, , may listed on line 51 of form 1040. every $1,000 of adjusted gross income above threshold limit ($110,000 married joint filers; $75,000 single filers), amount of credit decreases $50.
child , dependent care credit: if taxpayer must pay childcare child under age 13 in order pursue or maintain gainful employment, or may claim credit $3,000 of or eligible expenses dependent care. if 1 parent stays home full-time, however, no child care costs eligible credit.
credit adoption expenses: credit $10,000, phased out @ higher incomes. taxpayers have incurred qualified adoption expenses in 2011 may claim either $13,360 credit against tax owed or $13,360 income exclusion if taxpayer has received payments or reimbursements or employer adoption expenses. 2012, amount of credit decrease $12,650, , in 2013 $5,000.
family tax credit payment each dependent child aged 18 or young

education, energy , other subsidies

some systems indirectly subsidize education , similar expenses through tax credits.

the u.s. system has following nonrefundable credits:

two mutually exclusive credits qualified tuition , related expenses. american opportunity tax credit 100% of first $2,000 , 25% of next $4000 of qualified tuition expenses per year 2 years. lifetime learning credit 20% of first $10,000 of cumulative expenses. these credits phased out @ incomes above $50,000 ($100,000 joint returns) in 2009. expenses credit claimed not eligible tax deduction.
first time homebuyers credit $7,500 (closing date before sept. 30, 2010).
credits purchase of nonbusiness energy property , residential energy efficiency. several credits apply differing rules.




^ hm revenue & customs – reasons why tax credits might go down or stop . retrieved 16 march 2011. 
^ child poverty action group welfare benefits , tax credits handbook, 2011/12
^ rampen, julia (22 may 2015). benefits cap leaves children hungry , cold - how survive . 
^ decline of tax credits: tale of wishful thinking , saloon-bar logic . 
^ bbc (london) 15 september 2015 commons osborne plan tax credit cuts
^ tax credits (income thresholds , determination of rates) (amendment) regulations 2015 uk draft statutory instruments, retrieved 26 october 2015
^ parliament has voted, must charities take slack? turn2us, politics home, 16 september 2015, retrieved 26 october 2015
^ moore, sinead (11 september 2015). ifs hits @ new higher living wage . economia. institute of chartered accountants in england , wales. retrieved 4 march 2016. 
^ independent (london) 27 october 2015 tax credits: house of lords votes delay cuts 3 years
^ tax breaks single parents . smg. retrieved 2014-10-12. 
^ irs form 8800, 2014 tax year
^ presti , naegele tax newsletter, faq: tax breaks come raising child?, february 2012.
^ types of working families tax credits (understanding working families tax credits) . 
^ lifetime learning credit
^ energy incentives individuals: questions , answers . irs.gov. retrieved 15 may 2014.