Several Tax Breaks Are Available For Tough Times

Freep.com recently posted an article discussing some tax breaks that are especially helpful during the economic downturn. You can find a snippet of the article below, but the full story can be read here.

If you lost a job or earned less money during the recession, you could be shocked to discover something that could generate a bigger income tax refund than you'd imagine.

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States with high unemployment, including Michigan, are seeing more families with children who qualify for the Earned Income Tax Credit -- a refundable credit worth up to $4,824 in 2008 for some strapped families with two or more qualifying children.

"The earned income credit kicks in more readily than before for some of our clients because they're making less money," said Lew Elbert, a retired salaried employee from General Motors Corp. and an Accounting Aid Society volunteer.

Taxpayers could take advantage of several tax breaks to save money in rough economic times. The key thing, of course, is to file by Wednesday -- even if you do not have enough money to pay a bill.

Here's some tax help for cash-challenged taxpayers:

• Who gets the Earned Income Credit?

You may be able to take the Earned Income Tax Credit if you have more than one qualifying child and your earned income was less than $38,646 or less than $41,646 if married filing jointly.

The income limits drop if you have one qualifying child or no children. The maximum credit for workers with no kids is $438.

The credit can be complicated. You must have a valid Social Security number, among other rules, and earned income must come from employment or self-employment.

Low- to moderate-income Michigan residents now can get a new state Earned Income Tax Credit by filing a state return. The Michigan credit is 10% of the federal credit on the 2008 return.

• Who gets the Michigan Homestead Property Tax Credit?

If you've got a modest income and rent or own a home, you might qualify if all of this is true: The place where you have your permanent home is in Michigan. Vacation homes don't count. You were a resident of Michigan for at least 6 months during the year. You own or rent and resided in a Michigan homestead on which property taxes were levied. Your household income is less than or equal to $82,650.

Everyone won't get money; it will depend on how much you pay for your property taxes or rent in relation to your household income.

Taxing the Poor

From The Chicago Tribune:

A higher sales tax, new property taxes, gas taxes, sin taxes, utility fees, driving and parking rate increases, water taxes--even increased fees on coffee and tea and state fairs and library books!

Why do all new taxes seem to hit low-income people the hardest?

Illinois is one of the few states with a flat income tax rate. Most states have at least some adjustment of the rate as incomes get higher.

In April 2008, the Illinois House proposed a constitutional amendment to double the state income tax on people making more than $250,000 a year. It failed, partly because of concerns about then-Governor Blagojevich's money management. There is no excuse now.

It's the right thing to do. Internal Revenue Service figures show that almost half of our country's income goes to the richest 10 percent of Americans, those making at least $283,000 a year.

Also, the richest 1 percent of Americans pay about 5 percent of their incomes in state and local taxes, while the bottom 50 percent pay approximately 10 percent, according to the Institute on Taxation and Economic Policy and Citizens for Tax Justice. Governor Quinn should consider a graduated progressive tax that would keep middle-income families at their current level and raise taxes only on the wealthiest 10 percent.

Why do all new taxes seem to hit low-income people the hardest? Because it's easier than demanding a fair share from the rich who seem to yell a lot louder.