Tax credits are more valuable to taxpayers than deductions because they reduce tax payments dollar for dollar; their value is not dependent on the taxpayer’s tax bracket. In the past several years, Congress has used tax credits to effectuate administration policies, such as encouraging the purchase of homes to stimulate the poor housing market, and for businesses, hiring new employees and paying for employee health care. Moreover, an ever-growing number of credits are now fully or partially refundable so that they form a “negative income tax” (payments are made to taxpayers in excess of the taxes they owe).
There are now dozens of tax credits for individuals and businesses. Many of the credits for individuals have income limitations that bar their use by high-income taxpayers. Here are some of the new credits for 2010, as well as those that represent “last chance” opportunities because they are set to expire this year.
Making Work Pay Credit
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