Many of our clients have asked about how the “Making Work Pay Tax Credit” is going to affect their 2009 income taxes.
This credit actually took effect in 2009. The federal tax withholding table was changed to slightly increase your paycheck every pay period. Though this credit was taken out of your paycheck you are still required to claim it on your 2009 income taxes. A Schedule M will calculate this credit for you.
You qualify for this credit if you are a US citizen or legal residents with a valid Social Security number and have earned income. If you are claimed by someone else you are not eligible.
This credit is worth 6.2% of your earned income with a cap at $400 per person, if you are filing a joint tax return you can qualify for $800.
Individual who receive Social Security, retired railroad employees and veterans still qualify for a $250 credit. Some individuals may have received a check for this amount in 2009. If you did receive this check you need to inform your tax preparer so they can calculate your Schedule M correctly.
Just like every other tax credit there are phase outs according to your income. Individuals whose adjusted gross income exceeds $75,000, $150,000 for joint returns, will start to phase out this credit by 2%. This credit will completely phase out at adjusted gross incomes of $95,000 for individuals and $190,000 joint returns.
This is simplified version of the Making Work Pay tax credit. If you have any other questions regarding this credit please call our office at 915-857-8158.