Incentives Watch: Taxpayer Awareness of Both Federal and State Earned Income Tax Credits Needed

The Internal Revenue Service and the nation celebrated the Earned Income Tax Credit (EITC) Awareness Day last week. The spotlight was on the federal EITC, as the Internal Revenue Service used the day to remind taxpayers of the availability of the federal credit to low-income families. However, in addition to the federal EITC, many states offer their own version of the credit.

Like the federal credit, state EITCs are claimed against individual income tax and are intended to help low-income families. The state credit equals a percentage, which varies depending on the jurisdiction, of the federal credit amount. “In 2012, 24 states and the District of Columbia have an EITC which supplements the federal EITC by as much as 45 percent,” reports Elaine Maag in a Tax Policy Center blog.

New York announced its official recognition of National EITC Awareness Day in order to remind residents of the available tax benefits. “With benefits that average $600 and range as high as $1,700, this program is critical to the financial stability of these families, particularly when combined with the federal credit,” noted Thomas H. Mattox, the New York Commissioner of Taxation and Finance.

In addition to the EITC, New York also offers a unique noncustodial parent EITC. The noncustodial parent EITC is for full-year New York residents who are noncustodial parents paying child support. “In 2010, more than 7,700 noncustodial parents claimed $3.5 million in NCP EITC for an average refund of $456,” reports the press release.

Many states offer a state EITC, including Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New York, New York City, Oklahoma, Oregon, Vermont, Virginia, and Wisconsin.

In most states, it is simply referred to as the state EITC; however, some states have different names for the credit. For example, in Minnesota, the state credit is called the working family tax credit.

For more information about the state credits, take a look at Bloomberg BNA’s Individual Income Tax Navigator.

In other developments . . .

The New Jersey Tax Court recently ruled that television converters are exempt from use tax because the device is used primarily and directly in the transmission of television information, according to a Bloomberg BNA Weekly State Tax Reportarticle.

By: Kathleen Caggiano

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