American Income Tax Policy & Relation to Poverty

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Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a tax credit that allows taxpayers making up to a certain amount of income in a given year to deduct a credit amount from their tax owed. Depending on filing status (single, head of household, married filing jointly) and the number of qualifying children a taxpayer documents the credit amount may increase. The ability to claim this credit phases out at different income levels depending on filing status. [1] The maximum income level to qualify for the credit ranges from $13,6660 ($18,740 married filing jointly) with no qualifying children to $43,998 ($49,078 married filing jointly) with three or more qualifying children and the maximum credit amount ranges from $464, with no qualifying children, to $5,751 with three or more qualifying children for the 2011 tax year. [2] The total amount of EITC allowed to taxpayers has steadily increased throughout the last decade, due in part to greater awareness of the availability of the credit and various changes to the tax code. The data in Chart 1 demonstrates this growth in amount of credit claimed.

Chart 1: Growth of EITC allowed 1997-2008 [3]

Child Tax Credit

This Credit is for people who have a qualifying child.

In order for a child to qualify he or she must meet the following specifications:

  1. Be the son or daughter of the person claiming them as dependent.
  2. Was under the age of 17 at the end of the tax year.
  3. Did not provide more than 50% of his or her own support for the tax year.
  4. Lived with the taxpayer for more than half of the tax year.
  5. Is claimed as a dependent on your return.
  6. Did not file a joint return for the year.
  7. Was a U.S. citizen, a U.S. national, or a U.S. resident alien.[4]

Low-Income Housing Tax Credit

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