newjerseynewsroom.com

With Tax Day approaching, the Obama administration has put together a tax cut calculator and a tax cut checklist designed to help New Jersey taxpayers understand how they are affected by some of the more than 40 tax cuts the president has signed into law.

The calculator looks at the so-called bipartisan tax cut compromise that Obama signed into law at the end of 2010, and shows individuals and families how they may be benefiting from the compromise in 2011.

The calculator shows what the administration believes are the benefits of the Payroll Tax Cut, which it maintains is providing a larger paycheck for millions of workers across the country. It also illustrates how families may benefit from three Recovery Act tax cuts that the president fought to extend – the American Opportunity Tax Credit (AOTC) and the expanded Earned Income Tax Credit (EITC) and Child Tax Credit.

The calculator can be found on WhiteHouse.gov.

Administration officials said the three tax credits are something that families and businesses should keep in mind when filing this year’s tax returns.

Here is some background on the tax cuts included in the calculator. In addition, as families complete their taxes for 2010, a checklist is included that shows the Recovery Act tax cuts New Jerseyans may be eligible to claim on their tax returns.

• The administration says 4.7 million people in New Jersey benefit from the Payroll Tax Credit.
• 314,000 New Jersey families benefit from the American Opportunity Tax Credit.
• 321,774 people in New Jersey had their unemployment benefits extended in December following a bipartisan agreement signed into law by Obama.
• The administration maintains millions of New Jerseyans are benefiting and will continue to benefit from several tax credits. It declares the Payroll Tax Credit is currently benefiting 4.7 million New Jerseyans who will see $4.1 billion in tax relief this year. Families will continue to be eligible to claim key Recovery Act tax cuts in for 2011 and 2012. The tax cuts include the American Opportunity Tax Credit, which may help 314,000 New Jersey families afford college.
• The administration maintains the Payroll Tax cut is boosting paychecks for 4.7 million New Jerseyans this year by reducing the payroll taxes they pay on their wages from 6.2 percent to 4.2 percent.
• Under the American Opportunity Tax Credit (AOTC), the administration states New Jersey families will receive $698 million – an average of $2,200 per family – to help pay for college. Under the Child Tax Credit, the $1,000 child tax credit was extended and made available to more families. In total, extending the Recovery Act expansions of the Child Tax Credit tax credits will increase for 11.8 million families, with families with one child receiving up to $1,000 more and some families with two or more children receiving nearly $1,500 more.
• Earned Income Tax Credit: The bill extended expansions of the Earned Income Tax Credit for married couples and families with three or more children. In total, the Recovery Act provisions will benefit 5.8 million working families with 12.5 million children nationally.

The tax cut calculator focuses on the tax compromise that is designed to provide tax cuts for workers and families in 2011. But when completing their tax returns for 2010, taxpayers should not forget about the following Recovery Act tax cuts they may be able to claim:

American Opportunity Tax Credit: The Recovery Act created a new college tax credit that provides up to $2,500 for each of four years of college to help cover the cost of tuition and other educational expenses. Learn more about the American Opportunity Tax Credit.

Child Tax Credit: The Recovery Act made more families eligible for the Child Tax Credit, and increased the value of the credit for certain families. Learn more about the Child Tax Credit.

Earned Income Tax Credit: The Recovery Act expanded the amount that filers with three or more children could receive as a result of the Earned Income Tax Credit and increased the level at which it begins to phase out for married couples. Learn more about the Earned Income Tax Credit.

Residential Energy Credits: Under the Recovery Act, Americans who made some types of energy-efficient upgrades to their homes last year can get 30 percent of what was spent back – up to $1,500 – this tax season. Learn more about the Residential Energy Credits.

First-Time Homebuyer’s Tax Credit: First-time homebuyers who purchased by April 30, 2010 and settled by September 30, 2010 may be eligible to collect a credit of up to $8,000 with no payback requirement. Learn more about the First-Time Homebuyer Credit.

Making Work Pay Credit: Over 110 million working Americans qualified for the Recovery Act’s Making Work Pay Tax Credit, which saved individuals up to $400 per year and married couples up to $800 per year in 2009 and 2010. Even though you probably received the benefit of this credit in your paychecks from adjusted tax withholding by your employer, you must still claim the credit on your tax return. Learn more about the Making Work Pay credit.

– TOM HESTER SR., NEWJERSEYNEWSROOM.COM