The Earned Income Tax CreditAnother tax break created for lower-wage earners is the Earned Income Tax Credit, or EITC. This could provide some families with as much as $5,657 in tax savings. While the savings are more for larger families, childless taxpayers also could get up to $457 from the EITC.
This credit is refundable, which means even if don't owe the IRS, you'll get money back. The income thresholds vary according to your filing status and number of dependent children you claim and are adjusted each year for inflation. For 2009 taxes, the income limits range from $13,440 to $48,279.
Educational tax savingsTax help for higher education costs has been a big, and pleasant, surprise for many who've seen their income decline. In many cases this includes individuals who still made decent money, but just not as much as in past years.
Karsten says that's the situation for some of his clients who in 2009 saw their commission sales drop or who didn't get a bonus. "When I've alerted them to a deduction, they say you've always told me I wasn't eligible," he says. "And I tell them, well, you weren't, but this year you are."
Of particular note is the new American Opportunity Credit. It offers a credit of up to $2,500 and is available to single taxpayers who make $80,000 or less and married couples with joint income up to $160,000. Even if you earn more than that, you might qualify for a partial credit.
Free and easier filingThe IRS says that Free File, its partnership with tax software manufacturers, is available to 75 percent of taxpayers. That percentage might be even higher this filing season since so many people have seen a drop in their incomes.
With Free File, you can prepare your taxes and electronically file them just as the name says: at no cost. The only restriction is income. To use the free online tax prep and e-filing option your adjusted gross income, regardless of your filing status, must be $57,000 or less.
And the actual process of filling out a return also might now be easier for some taxpayers.
"If you've been itemizing in past, but your business had a bad year or you lost your job, you might find that you don't need to itemize this year," says Scharin. "If you're not itemizing, you don't have to go hunting around for your receipts. So at least you don't spend your time focusing on what you're not going to need."
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