- The Washington Times - Wednesday, February 9, 2005

Don’t file your taxes too quickly before finding out what you can get back from Uncle Sam to help you save for your down payment. There’s more available for increasing your tax refund than just your basic personal deductions.

Tax credits can be another way to increase your refund or create one altogether, injecting bucks into your savings account.

“Thousands of people every year pass up millions of dollars because they don’t know they can take advantage of some or all of the credits” available to them, according to the Department of Housing and Urban Development’s Web site (www.hud.gov).

As you prepare your Form 1040, be sure to look over the credits listed here to see if you can increase your personal bottom line: earned income tax credit.

Last year, more than 21 million taxpayers raked in $36 billion through the earned income tax credit, also called the earned income credit.

This credit can create a refund boon for low-income working individuals and families.

Originally put in the tax code in 1975, the EITC was created to offset the burden of Social Security taxes and to provide an incentive to work.

The IRS says that when the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

To find out if you qualify, visit www.irs.gov and take advantage of the EITC Assistant (use this address: https://apps.irs.gov/app/eitc).

Here are the basic requirements:

• Must have earned income

• Must have a valid Social Security number

• Investment income is limited to $2,650

• Filing status cannot be “married filing separately”

m Generally must be a U.S. citizen or resident alien all year

m Cannot be a qualifying child of another person

• Cannot file Form 2555 or 2555-EZ (related to foreign earned income).

When you consider that the average taxpayer using the EITC was able to pull in about $1,714, that’s a good chunk of change for your down-payment savings account.

Child tax credit

Having children has never been more financially beneficial when it comes to tax deductions.

Not only do the tikes count for deductions as dependents (2004 amount is $3,100 each, according to www.irs.gov), but you may also be able to claim a child tax credit for each child that qualifies.

For 2004, the maximum amount of the credit is $1,000 for each qualifying child.

To qualify, the child must be:

• Claimed as your dependent

m Under age 17 at the end of 2004

• (a) Your son, daughter, adopted child, stepchild or a descendant of any of them; (b) your brother, sister, stepbrother, stepsister, or a descendant of any of them whom you care for as you would your own child; or (c) an eligible foster child

• A U.S. citizen or resident.

As you can see, here’s another area that could put more money into your down-payment account.

Check with your tax professional to see if you qualify for these deductions and credits.

IDA providers

You can use an individual development account to save toward the purchase or repair of a home or to pay off a long-term debt.

Some companies have partnered with IDAproviders to help their employees by making matching contributions.

A list of IDA groups can be found at the IDA Network (https://idanetwork.cfed.org/2003idasurvey/survey_search.php).

The search directory is operated by the Corporation for Enterprise Development in the District.

The CED explains that an IDA is a tool to “enable low-income American families to save, build assets and enter the financial mainstream.

IDAs reward the monthly savings of working poor families who are trying to buy their first home, pay for post-secondary education or start a small business.”

The incentive to the individual saving in an IDA is through the use of matching funds, which typically come from a variety of private and public sources.

It’s like a 401(k) for homeownership.

M. Anthony Carr is the author of “Real Estate Investing Made Simple.” Post questions and comments at his Web log (https://commonsenserealestate.blogspot.com).

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide