How Being Low Income, Middle Class Can Give You an Advantage at Tax Time
By Victor Ochieng
Most people who’ve got long-term capital gains face taxation, something many feel significantly cuts down on returns. Most people face 15% in tax for their capital gains or qualified dividends. Those who are re at the upper end of the wealth list are faced with 20% in tax.
Because of their low income, those belonging to the lowest two brackets of income don’t pay any taxes on their capital gains or dividends. It’s quite an admirable tax break, particularly for retirees, who earn some Social Security benefits. It’s also beneficial to unemployed individuals who may want to offload some of their assets and use the proceeds for their upkeep.
Should you want to benefit from the 2015 zero percent capital gains rate, your taxable income shouldn’t be more than $37,450 for a single person; $50,200 for someone who’s single with a household that has dependents; or $74,900 for a couple making joint filing. A point to note is that the figures above refer to taxable income. That basically refers to the amount left from your adjusted income after you’ve subtracted your personal exemptions and itemized or standard deduction.
At the time of filing your return, there are several other ways you can work to save your return.
Below are a few;
Take tax breaks for retirement saving – Should you be earning income for work you do or rather than from investments, you can take advantage of a traditional IRA. You can contribute up to $5,500 a year or make it $6,500 if you’re hitting 50 years at the end of the year. There are, however, limits to how much your income should be to take advantage of the deduction.
Take advantage of Saver’s Tax Credit – For someone who’s single and having an adjusted gross income of not more than $30,500 or not more than $61,000 for a married person, you can enormously benefit by saving for retirement through the Saver’s Tax Credit. At the end of it, the contributor can make a tax credit of between 10% and 50% of your savings. Other eligible contributions in this category are traditional Roth or SEP IRA, as well as 401(k) or 403(k). The lower the income the bigger the credit percentage.
Take advantage of Earned Income Tax Credit – If you’re working, you can enjoy Earned Income Tax Credit of between $503 and $6,242, depending on how much you earn from your work. The interesting part with the EITC is that should it go beyond the taxes you owe, you get a tax refund.
Child Tax Credit if you have a baby – For individuals in the lower and middle class income category, a new baby brings along $1,000 in child tax credit. This continues until the child turns 17 years of age.
Get Child Care Tax Credit – For someone whose child is below 13 years, they can take advantage of child care tax credit between 20% and 35% to a maximum of $3,000 for someone having one child and $6,000 for someone having two or more children.
These are just but a few that you can take advantage of.