As the debate over extending those Bush tax cuts continues, another tax break is slipping away… The Making Work Pay Credit, in place for the 2009 and 2010 tax years, is likely to not be extended to 2011 or beyond.
Tax preparers (and tax software manufacturers) are likely breathing a sigh of relief. The tax break provided up to $400 in refundable credit to individuals and $800 for couples filing jointly. But the break, targeted to the middle class, had a number of tricky provisions that disqualified some taxpayers – and caused headaches for others. In the end, even though it was extra money in pocket for many taxpayers, the overall impression of the credit wasn’t a good one. That’s an important consideration when comparing political bang for your buck: the cost of extending the credit for an additional ten years is $600 billion.
Also on the chopping block? The American Opportunity Tax Credit, a modified version of the Hope Credit, used to pay for college. The “new” credit expanded the pool of taxpayers eligible for the credit, benefiting more upper middle class taxpayers. The credit was partially refundable meaning that taxpayers would be eligible for a refund if the credit was more than their tax obligation.
Expect both of these credits to fade away with little to no attention – you know, except from tax geeks like me.
Speaking of little-noticed but consequential legislative inaction, Congress hasn’t passed a 2010 AMT patch yet, have they?
What Mary Kay said. 😉
I think the patch that’s being considered currently is a 2 year patch. What they should do is stop patching and start fixing!
The AMT patch and some other good provisions are part of an Extenders Bill that seems to have support but hasn’t been passed yet. Keep your fingers crossed because the AMT without the patch will affect an incredible number of folks.
We’ve had trouble with the Making Work Pay Credit – when one spouse is covered by Social Security and the other has a government pension and isn’t on Medicare the IRS has been denying a $250 credit when it’s owed.