By State Senator Julie Lassa
The annual arrival of W-2 forms in the mail means that tax time is not far away. Many people coping with layoffs and reduced hours at work may not realize that their lower income could qualify them for tax breaks they may not have qualified for previously. The Earned Income Tax Credit (EITC) and the Homestead Credit are two such tax breaks specifically designed to help lower income working families or seniors on a fixed income.
Tax credits are different than tax deductions, because they directly reduce the tax you pay. Plus, you can generally claim these credits for past tax years, if you were eligible for them.
The EITC is a federal refundable tax credit. You may qualify if your earned income and adjusted gross income are both less than:
- $43,998 ($49,078 if married filing jointly) with three or more qualifying children;
- $40,964 ($46,044 if married filing jointly) with two qualifying children;
- $36,052 ($41,132 if married filing jointly) with one qualifying child;
- $13,660 ($18,740 if married filing jointly) with no qualifying children.
The maximum credit for the 2011 tax year is $5,751. A number of restrictions apply, so be sure to check out the IRS Web site at www.irs.gov/individuals/article/0,,id=96406,00.html, or see the instructions for Form 1040 or Form 1040A for more details. The IRS Live Assistance line is (800) 829-1040.
There is also a Wisconsin EITC. You qualify for it if you can claim the federal EITC and have at least one qualifying child, and it is based on a percentage of your federal EITC credit depending on how many qualified children you have. The maximum Wisconsin EITC for 2011 is $1,955.
Low-income Wisconsin residents who own or rent a dwelling may qualify for the state Homestead Credit. Your “homestead” is the Wisconsin home you occupy, whether you own it or rent it, and up to one acre of land adjoining it (or up to 120 acres of land if the homestead is part of a farm). A homestead could be a house, an apartment, a rented room, a mobile home, a farm, or a nursing home room. The Homestead Credit represents a portion of the property tax you paid, either directly or through your rent.
You may qualify for the Wisconsin Homestead Credit if your household income was less than $24,680 for 2011. The maximum credit for 2011 is $1,168. For instructions on determining your eligibility and calculating your credit, review the Department of Revenue website, www.revenue.wi.gov/individuals/homestead.html, or see the instructions for Schedules H and H-EZ. The DOR phone number for help with the Homestead Credit is (608) 266-8641.
Several human service agencies provide volunteer tax assistance to help you identify credits you may be eligible for. For help locating tax assistance in central Wisconsin, dial 2-1-1 to be connected with the United Way’s information and referral hotline. In south Wood County, call the Incourage Community Foundation at (715) 423-3863.
You should be aware that recent changes passed by the Republican legislature and signed into law by Governor Walker have reduced the value of these tax credits, and amount to a tax increase on low-income families and seniors. The maximum state EITC credit for low-income families with three or more children will drop $518 this year, and indexing changes to the Homestead Credit will cost individual taxpayers as much as $23 this year and as much as $57 next year. Since almost a third of those who claim the Homestead Credit are over 65, this tax increase will fall disproportionately on seniors.
I hope that you find this information about the EITC and the Homestead tax credits useful as the April 17 tax deadline approaches.
