Credits boost tax refund checks

With the income tax deadline two months away, 1.1 million Georgians and 611,000 South Carolinians have already filed their tax returns electronically, said IRS spokesman Mark Green.

Thanks to federal stimulus packages, more tax credits are available to Americans than Mark Daniel can remember in his decades of tax work in Augusta.

Daniel, the director of the local Rhodes-Murphy Income Tax Service chain, said the most common credits he sees are for residential improvements, education and the expansion of the earned income tax credit.

Also popular is the Making Work Pay Tax Credit: $400 for working singles and $800 for working married couples.

"These are all things the current administration did to spur bigger refunds. They want to put more money in the taxpayer's pocket," Daniel said.

"I've never seen refunds as large as I've seen this year. Up into the $9,000 to $10,000 ranges. And these are just average working people that are getting a combination of refundable education credits and earned income credit," he said.

Here are some of the credits to look for:

- Earned income tax credit

The thresholds and rules were changed to allow more people to qualify for the $1,000-per-child tax credit. A family with three or more children with a household income less than $48,279 can claim it. In previous years, the limit was two children. For those with two children, $45,295 is the income ceiling.

"These increased dollar amounts, including those for larger families, and higher income limits are likely to make a big difference for countless working families, especially in these tough economic times," said Mark Steber, the chief tax officer for Jackson Hewitt Tax Service.

People can get the money for the credit even if they owe no tax and even if no tax is withheld from their paychecks. The new formula is also in place for 2010.

- American Opportunity Tax Credit

This new credit is worth as much as $2,500 for households with students in college. The IRS says even those who owe no tax can get a refund of as much as $1,000 for each eligible student.

Essentially, this is a modification of the Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 on qualifying expenses such as tuition and books.

- Energy property credits

The Non-business Energy Property Credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. What that means, Daniel said, is that once taxpayers collect the $1,500, that's it, even if they continue to make energy-efficient improvements.

The improvements that qualify for the credit include work on windows, doors, air conditioners, heaters, insulation and certain kinds of roofs.

One nuance to watch out for: The labor cost of installing the heater or air conditioner counts toward the credit, but not the labor cost of installing doors and windows.

The Residential Energy Efficient Property Credit comes into play if a home- owner spent money on solar or wind technology. It equals 30 percent of what was spent on equipment such as a solar water heater or geothermal heat pump.

In other news of note for the tax year, people who bought a new car, truck or motorcycle can deduct the state or local sales tax. If they bought the new car or truck and got a Cash For Clunkers rebate, the rebate doesn't count as income.

The Making Work Pay Tax Credit is hurting some taxpayers, Daniel said, and that stems from the federal government lowering the amount of income tax withholdings.

"In some instances the tax credit isn't enough to offset the weekly reductions. Some of the refunds have been smaller because of that, and they want to know why their refund isn't as big as last year," Daniel said.