Income Tax Credit Chicago Illinois

Updated July 24,2015
 
Income Tax Credit Chicago Illinois
 

What is a Tax Credit?

 
A tax credit is a sum deducted from the total amount a taxpayer owes to the government. A tax credit may be granted for various types of taxes, such as an income tax, property tax, or VAT or Value Added Tax. It may be granted in recognition of taxes already paid, as a subsidy, or to encourage investment or other behaviors. In some systems tax credits are ‘refundable’ to the extent they exceed the relevant tax. Tax systems may grant tax credits to businesses or individuals, and such grants vary by type of credit.

 

 
The U.S. system grants the following low income tax credits:

 

  • Earned Income credit: this refundable credit is granted for a percentage of income earned by a low income individual. The credit is calculated and capped based on the number of qualifying children, if any. This credit is indexed for inflation and phased out for incomes above a certain amount. For 2009, the maximum credit was $5,657.
  • Credit for the elderly and disabled: A nonrefundable credit up to $1,125
  • Retirement savings credit: a nonrefundable credit of up to 100% of contributions to IRAs or similar plans, phased out at incomes above $16,000 ($24,000 for head of household and $32,000 for joint returns).

 

Family Relief

 
Some systems grant tax credits for families with children. These credits may be on a per child basis or as a credit for child care expenses.
The U.S. system offers the following nonrefundable family related income tax credits (in addition to a tax deduction for each dependent child):

 

  • Child Tax Credit: a credit up to $1,000 per qualifying child.
  • Child and dependent care credit: a credit up to $6,000, phased out at incomes above $15,000.
  • Credit for adoption expenses: a credit up to $10,000, phased out at higher incomes.

 

Education, energy and other subsidies

 
Some systems indirectly subsidize education and similar expenses through tax credits.
The U.S. system has the following nonrefundable credits:

 

  • There are two credits for qualified tuition and related expenses. The American Opportunity Tax Credit is 100% of the first $2,000 and 25% of the next $4000 of qualified tuition expenses per year for up to two years. The Lifetime Learning Credit is 20% of the first $10,000 of cumulative expenses. These credits are phased out at incomes above $50,000 ($100,000 for joint returns) in 2009. Expenses for which a credit is claimed are not eligible for tax deduction.
  • First time homebuyers credit up to $7,500.
  • Credits for the purchase of certain nonbusiness energy property and residential energy efficiency products. Several credits apply with differing rules.

 

Business tax credits

 
If you are having problems with your Income Tax Credit Chicago Illinois or have issues with your accounting in general, we would love to help. I enjoy hearing from my readers, and can be contacted at
 
Chris@AccountingSolutionsltd.com
 
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www.AccountingSolutionsLtd.com
 
Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.