In 2013, your tax bill could be hundreds or even thousands of dollars higher. Four tax cuts that were introduced under the Obama and Bush administrations and have benefitted low-income parents are set to expire on January 1, according to CNNMoney.
Many families will lose hundreds to thousands of dollars should the Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit and the American Opportunity Credit fail to get renewed.
What, exactly, do these tax cuts do?
The Child Tax Credit allows lower-income parents to claim as much as $1,000 for each child under 17. When the provisions expire, the tax break will drop back down to a maximum of $500. Only working families with three or more children will be eligible to receive cash refunds. That means couples with two children could pay an extra $1,000 in taxes next year.
The Child and Dependent Care Tax Credit allows working parents (or those who are searching for a job) to report up to $3,000 of child-care related expenses per child, up to a maximum of $6,000 for each family. Families can claim 35% of these expenses as a credit. And once this break expires, the credit will revert back to being able to report $2,400 per child or $4,800 per family. The maximum credit falls to 30% of expenses. Right now, the parents with two children could get $2,100 in credit but that goes down to $1,440 next year.
The Earned Income Tax Credit gives poor families money for every child they have. The income necessary to receive this credit was raised by $5,000 and when it expires, it will fall back to the lower income levels. Families with at least three children who had previously claimed this credit could be $600 poorer next year.
The American Opportunity Tax Credit was launched to help lower-income families pay for college. It allows eligible families to claim up to $2,500 each year for four years. When it expires, it will revert back to the previous Hope Credit and the maximum credit will drop to $1,800. Families will only be able to claim the credit for two years.
How do you feel about these tax cuts expiring? Does your family rely on them? Leave a comment and let us know!