How Tax Credits Can Work For Lower-Income Wisconsinites
Many low- and moderate-income working families in Wisconsin may qualify for thousands of dollars in tax credits. Together, the federal Earned Income Tax Credit and the state Earned Income Credit can provide a person or family anywhere from a few dollars to more than $8,000, depending on total household income, marital status and number of children.
Designed for households with earned income from work, these credits are intended to supplement wages and increase their purchasing capacity. Workers can receive the credits even if their incomes are too low to pay any income tax.
These tax credits are a critical source of income for hundreds of thousands of working families around the state who often struggle to meet their basic needs. They're also good for communities, since the funds going to families in turn infuse more money into local economies.
Households need at least some earned income from work to be eligible for the federal EITC. For unmarried tax filers with children in the household, the income limits range from $39,296 with one child to $47,955 with three or more children. All income limits are approximately $5,000 higher for married households. A smaller credit for some tax filers without children is available with incomes up to $14,880 if unmarried or $20,430 if married.
The amounts of the credits also vary depending on who is in the household, with the highest credits for households with three or more children. The federal EITC ranges from a few dollars to more than $6,000; the Wisconsin credit — which is available to any household with children that qualifies for the federal credit — can be as high as $2,131. Amounts for the state’s credit also vary and gradually decline in value as income approaches the maximum level.
To receive these credits, eligible people must file taxes and specifically claim the credits on their returns. Both federal and Wisconsin taxes must be filed to receive credits. In 2017, the Internal Revenue Service will not issue refunds before Feb. 15 for returns that include the EITC before Feb. 15, but households don’t have to wait until then to file their returns.
Every year, thousands of eligible families miss out on earned income credits simply because they don’t file tax returns. People who may not have been eligible in the past are more likely to miss out, as are non-English speakers, people with changes in household circumstances and those whose income is too low to otherwise have to file tax returns. People new to Wisconsin may not be familiar with the state EIC, as it is not available in all states.
Filing a Wisconsin tax return also allows many people to claim the Homestead Credit. This credit is intended to offset the impact of rent and property taxes on low- and medium-income households. It is available to renters and homeowners with incomes up to $24,680, and can be worth as much as $1,168.
Help available to determine eligibility for credits
The University of Wisconsin-Extension provides information to help eligible households learn about these tax credits, eligibility and benefits. These materials include information about program rules, links to necessary tax forms, sources of free tax assistance and resources for groups interested in helping to get the word out about the tax credits.
For individualized free help in filing taxes and claiming credits, taxpayers use Volunteer Income Tax Assistance or Tax Credit for the Elderly programs, which help people prepare their returns. To fill out a tax return, a variety of information is needed:
- Photo identification
- Valid Social Security cards for the taxpayer, spouse and dependents
- Birth dates for people listed on the return
- Current year's tax package, if received
- Wage and earning statements: Form W-2, W-2G, 1099-R from all employers
- Interest and dividend statements from banks (Form 1099)
- Copy of previous year's federal and state returns, if available
- Bank routing numbers and account numbers for direct deposit
- Any other relevant information about income and expenses
- Total paid for day care
- Daycare provider's identifying number
People consulting tax preparers to determine eligibility for federal and state earned income and other credits should bring along as much of the listed information as possible.