New York_It may not be enough to jump start your personal economy, but your tax refund this year may contain a bit of extra stimulus. That's especially true if the national downturn has hit home.
The recovery rebate for 2008 and a series of tax credits aimed at low-income earners could help increase the size of refunds for many taxpayers.
The economic stimulus checks sent out by the Internal Revenue Service last year were based on 2007 tax returns, but if you earned less in 2008, you may still be eligible for a credit.
If you didn't get a check, or you got one below the maximum $600 ($1,200 for married couples filing joint returns), you may qualify.
"It's entirely possible that somebody could have income that was too high to qualify for a rebate last year, but because of the economy, could qualify now," said Harris Abrams, senior tax analyst from the tax & accounting business of Thomson Reuters.
"I think (the recovery rebate credit) will apply to a good deal of taxpayers," agreed Maureen McGetrick, tax partner at BDO Seidman in New York. "That is definitely something that people should be on the lookout for."
Besides lower income, more positive life changes like growing your family in 2008 can boost the amount you're due from the recovery rebate credit. That's because you can claim a $300 credit per child. Likewise, people who struck out on their own in 2008 but were claimed as a dependent by someone else in 2007 can claim a $300 credit.
The recovery credit is just one thing that may come into play for taxpayers who earned less in the last year. Mark Luscombe, principal analyst for the tax and accounting group at CCH, a consultant based in Riverwoods, Ill., noted tax laws contain myriad items that apply differently to varying income levels. "There's just a ton of provisions in the code that have phaseouts," he said. "So any one of them could come into play if you had a drop in income."
Earned Income Tax Credit: Taxpayers whose income falls below a certain threshold may be eligible for the earned income tax credit. The credit, which reduces the amount of tax owed, also rises with the number of children in a family. For 2008, a childless single person who earned less than $12,880, or $15,880 for a married couple filing jointly, there is a $438 credit.
For a family with two or more children, the income threshold rises to $38,646, or $41,646 for a married couple filing a joint return. These families could claim an EITC up to $4,824.
Abrams said anyone who has seen their income drop should check to see if they're eligible for the credit: "The fact that you checked it last year and you didn't qualify doesn't mean that you shouldn't take another look."
Dependent care credit: While this is commonly referred to as the "child care credit," it can also apply for money spent to provide care for other dependents, like elderly parents, if they are incapable of caring for themselves. Most taxpayers can claim a credit for paying for the care of a dependent while at work. There is a somewhat complicated formula for determining the precise amount, but in general, it falls between $1,050 for someone earning $15,000 or less, and $600 for a person earning more than $43,000. Those credits are doubled if the worker claims more than one dependent.
Saver's credit: Another income-based credit is the saver's credit, which applies to voluntary contributions to employer sponsored retirement plans or individual retirement arrangements, usually called IRAs. "You may be able to make a deductible contribution where you couldn't in the past," said McGetrick.
The $1,000 credit ($2,000 for married couples filing joint returns) is available for individuals earning up to $26,000, or to heads of households earning up to $39,750 (or married couples earning up to $53,000.)
Education credits: Families who paid certain higher education expenses may be eligible for the Hope credit, or the lifetime learning credit, which both phase out if adjusted gross income is $58,000 (For a married couple filing jointly the limit is $116,000.)
Eligibility: Abrams of Thomson Reuters pointed out that each rule has a different income limit. "The phase out rules are sufficiently complicated that you should not assume that you don't qualify for one if you don't qualify for another," he said.
Do-it-yourself tax preparers using popular software or the free e-file programs available through http://www.irs.gov should be prompted to check if they are eligible to claim such credits.
If you pay someone to prepare your taxes, don't forget to ask about credits that might not have applied in years past. "It's definitely worth raising a question," Abrams said. "I think they would apply to a lot of middle class people," adding that a bigger tax refund could provide, "a little silver lining to this economy."