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$400 or $800 Making Work Pay Tax Credit

Bundled in the 2009 economic stimulus plan is the $400 ($800 for couples) Making Work Pay tax credit that will provide a tax credit in 2009 and 2010 equal to 6.2 percent of your earned income up to a maximum of $400 for individual filers and $800 for couples.

Here’s what you need to know:

The $400/$800 Making Work Pay tax credit took effect in July 2009. Workers who have taxes withheld from their paychecks will see a decrease in the federal income taxes withheld from each paycheck by about $30 per paycheck every two weeks or $60 for couples.

If you are self-employed, you can claim the credit when you file your 2009 tax return or reduce each of your 2009 quarterly estimated tax payments by $100. Software like TurboTax will automatically prompt you to take this credit.

The credit will phase out by two percent of any income over $150,000 for couples and $75,000 for others. Couples earning more than $190,000 and individuals earning more than $95,000 will not benefit from the credit.

Unlike the 2008 economic stimulus tax rebate checks that were mailed to taxpayers in a lump sum, the government is hoping that offering the $400 Make Work Pay tax credit as a reduction in payroll deductions will encourage taxpayers to spend the credit rather than save the money or use it to pay down debt.

According to some estimates, the Making Work Pay tax credit will cost the U.S. government $116.2 billion over 10 years, making it the largest tax provision in the 2009 stimulus plan.

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Published on February 20th, 2009.

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61 Response(s)

  1. jc

    I noticed the difference especially when my work heath insurance took an extra $70 out of my paycheck but as far as the $13 a paycheck couldn’t notice that tiny amount,I was too mad about the heath insurance I have to work 2 hrs over time every day and sometimes when my work place allows on my days off just to pay my bills

    19 June 2010 at 12:02 am permalink Reply

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