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Take Credit Where Credit Is Due: CCH Identifies Credits to Lower Income Taxes
(RIVERWOODS, ILL., March 26, 2012) – Any tax break can help lower taxes, but credits are particularly beneficial compared to deductions because they can reduce a taxpayer’s tax bill dollar for dollar, according to CCH, a Wolters Kluwer business and a leading global provider of tax, accounting and audit information, software and services (CCHGroup.com).
“Tax deductions lower your taxable income, but their value is based on your tax bracket,” explained Mark Luscombe, JD, LLM, CPA and CCH Principal Federal Tax Analyst. “So, for example, a $1,000 tax deduction for someone in the 25-percent tax bracket would lower their taxes by $250. However, a $1,000 credit would lower their tax bill by $1,000.”
Below, CCH identifies important tax credits for 2011:
Broadly Available Tax Credits for Individual Taxpayers
Save green for going green. Several tax breaks are available to taxpayers for making energy-efficient choices in their homes, but there are also tax credits available – depending on what you drive. Tax credits for energy-efficient vehicles include:
- Alternative Motor Vehicle Credit – Taxpayers may be able to take this credit if they bought a qualified fuel cell vehicle in 2011. The credit is also allowed for the cost of converting a vehicle to a qualified plug-in electric drive vehicle. To take the credit, you must complete Form 8910;
- Plug-In Electric Drive Motor Vehicle Credit – You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle in 2011.The credit ranges from $2,500 to $7,500; and
- Plug-In Electric Vehicle Credit – For this credit, the vehicle can have 2, 3 or 4 wheels. A vehicle with 4 wheels must be a low speed vehicle. The credit, which is taken on Form 8834, is 10 percent of the cost of the vehicle, limited to $2,500 per vehicle.
Get credit for working. The Earned Income Tax Credit (EITC) is one of the most broadly available credits for people with low or moderate income. Still many people overlook this every year. The EITC is a refundable credit, meaning even if someone doesn’t owe any tax, they can still receive money back from the credit. For 2011, the maximum EITC is $5,751 and the maximum earned income limit for claiming the EITC is $49,078. More detail on the EITC is available here.
Give the kid some credit. The child tax credit is $1,000 for each child. The 2010 Tax Relief Act also extends some enhancements to the adoption credit and the dependent care credit for two years. More on marriage and child tax credits is here.
Study up on education credits. Two important credits to help taxpayers with post-secondary education are the American Opportunity Tax Credit, providing up to $2,500 per student per year, and the Lifetime Learning Credit, providing up to $2,000. Both have income restrictions. CCH compares them here.
More information and tax season details are accessible by visiting CCH’s special tax season press center which is available here.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading global provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading solutions are The ProSystem fx® Suite, CorpSystem®, CCH® IntelliConnect®, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill. Follow us now on Twitter @CCHMediaHelp. Wolters Kluwer (www.wolterskluwer.com) is a market-leading global information services company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.