Managing your bills can be difficult for people with low incomes. However, unfortunately, this does not exempt you from tax liability. However, the good news is that there are certain tax breaks available if your income is less than $50,000. Here are some tips to maximize your effectiveness.
1. Don’t Pay to File Your Taxes
If your income is $79,000 or less, you’re eligible to file your taxes for free. What will happen is that you will be able to choose your tax software options and be able to file your tax return electronically.
This is a good thing because when the time comes for your refund, you want to have the money in your checking account as soon as possible. Returns filed electronically are typically processed much more quickly than returns filed on paper.
2. Check to see if the Earned Income Tax Credit applies to you
Dollar for dollar, your tax liability is decreased when you receive a tax credit. It is possible for certain tax credits to decrease your tax liability to zero, but they are not refundable. Nevertheless, the EITC, or Earned Income Tax Credit, is entirely refundable. Thus it could put a good sum of money in your pocket if you qualify for it.
As you can see from the table below, if you earn $50,000 or less, either as an individual or as part of a couple filing a joint return, you may be eligible for the credit.
| Qualifying Children in Household | Income Limit: Single Tax-Filers | Income Limit: Joint Tax-Filers | Maximum EITC Value |
|---|---|---|---|
| 0 | $17,640 | $24,210 | $600 |
| 1 | $46,560 | $53,120 | $3,995 |
| 2 | $52,918 | $59,478 | $6,604 |
| 3 or more | $56,838 | $63,398 | $7,430 |
Let’s say you’re married and your combined household income is $48,000. As long as she has one or more qualifying children in the household, she will be eligible to receive the credit.
3. Please claim a portion of the childcare fee
If her income is less than $50,000, child support can be a significant burden. But a loan called the Child and Dependent Care Credit may help.
With this credit, you can claim up to 20% to 35% of childcare costs for one child, up to $3,000, or 20% to 35% of childcare costs, up to $6,000 for two or more children. To be eligible for the credit, a child must be under the age of 13.
The percentage of expenses you can claim depends on your income. If the amount is $15,000 or less, you can claim 35% of the above costs. This percentage decreases as income increases. However, for those who earn more than $43,000, the percentage of expenses that can be claimed is 20%.
So let’s say your income is $45,000 and you have a child who costs $8,000 a year in child support. In this case, you can claim 20% of $3,000 or $600. You should also know that, unlike the EITC, the Child and Dependent Care Credit is non-refundable.
If you don’t have a lot of income, it’s important to take advantage of all the tax breaks. These special perks can bring you many benefits. Be sure to use our free tax preparation service and claim all credits to which you are entitled.