re: EITC - income taxes

They are not the same at all. He couldn't have put it in more simple terms. One promotes activity from taxpayers (buying a home, going to school) the other just gives you money.

quote:

---

The next mortgage or student loan originated specifically for the interest deduction will be the first. I have yet to meet a single person that bought a home or went to school for the interest deduction.

---

I hear you, but if you talk to any realtor, one of the first things they tell you why to buy a home, is the interest deduction.

quote:

---

People agree to pay 5% to the bank for a mortgage or student loan and then think they are entitled to some of that money back from the government.

---

Wrong - they are allowed to deduct these payments (i.e. money they paid to some other entity) from their income, to lower what amount they owe to the federal government - if they were already in an overwithholding (i.e., they or their employers OVERPAID for taxes during the year), this will increase that. It certainly affects either their refund (increases) or their April 15 tax bill (decreases) - but it is not a handout. It is not money taken from someone else, but rather a built-in deduction for an authorized expense.

quote:

---

It is a basic government hand out in another form.

---

No, it is not. The EITC for which you're trying to qualify IS a government handout.

quote:

---

The deduction is tied to income level, so it is another form of income redistribution too.

---

Well - the deductions are phased in, capped and tied to income levels. But it does not mean those folks aren't incurring that expense, just because they don't qualify for the deduction, or all of the deduction.

All that means is that the government has placed limits on how these deductions may be applied.

Credits and deductions function in similar ways but reflect different things.

For example, lets take a hypothetical "energy efficient" improvement tax credit - this is directly applied to your tax bill and, lets assume it is refundable - you buy new fridge, or AC, furnace, what have you - and the government allows a credit (not a deduction, but a credit) - now credits - regardless of what they're for, are a "handout" to a certain degree. In some cases, you're expected to spend money, create a job, what have you, whatever is being encouraged by the credit. But, it is applied directly to the tax bill - not a reduction of taxable income (deduction - not a handout), but effectively, on paper handing you money with which to pay your tax bill (credit - a handout).

And if refundable, if your overall income, credits, deductions, results in a net gain for you - like the EITC - that's welfare, wealth redistribution, pure and simple - they took money from other taxpayers and gave it to you - not like a deduction at all.

quote:

---

think you wasted your time with all that.

---

Some people curse the darkness. Others light a candle.

I like to do both.

quote:

---

The EITC is probably the only successful welfare program we have.

---

Meh. There's a lot of fraud in there. It does help working students, minimum wage earners and, at least is tied to gainful employment. I wish they were a little more strict on verification of self-employment - or just eliminate self-employment as eligible for EITC - that's where all your fraud is.

quote:

---

The EITC is probably the only successful welfare program we have. Widely regarded as being positive and well thought of by both parties

---

When it comes to welfare, it's probably the best idea they have come up with. It rewards people for working, which makes a lot of sense.

However, the fraud with it has been so bad, that if you hire a tax preparer to do your return and you get the EITC, the preparer actually has to fill out additional paperwork showing that it's not fraud.

An entire industry has cropped up around finding the "sweet spot" of the EITC - exactly how much you should earn to maximize benefits.

quote:

---

You guys can get mad if you want but the government is subsidizing your mortgage whether you can admit it or not.

---

Where did I not admit it? Call it a subsidy, if you like, and that's not fully inaccurate. However, it is not taking money from another taxpayer and handing it to me, gratis. It is merely allowing me to reduce my effective income (i.e. money I earned) and the taxes I owe. It's a subtle difference but an important one. Ergo, not "welfare".

EITC is.

Fair enough. They all fall under the umbrella of a government subsidy, which is a major point of contention for me in a "free market" economy.

FTR, I have never qualified for the EITC and probably won't this year either. It doesn't mean that I won't try for it. i think anyone would.

we will be above the income level i believe.

"try for it" - as in make every effort to qualify for it (which the 2nd poster informed me would be unlikely since it isn't AGI only). I try to make as much income as possible and then see where the chips fall with taxes.

no, i don't know who it is intended for. I ran across an article discussing things to look for on your income taxes if you have a child (2014 being my first year). I came here for help.

quote:

---

no, i don't know who it is intended for.

---

It was primarily an incentive to work at a job AND offset the costs of having young children in the home.

It was not intended to be some lottery prize - if you're above it - it is supposed to phase out as you do better and better. If you were below the "sweet spot" I would have encouraged you to try to make more money.

But, since you're above it, you should strive to grow out of it - also as intended. That's the problem with this millstone of a tax code - everybody stops thinking about the actual goal (making more money) to game the income tax system.

And don't take this as a criticism - every single person does it - I do it, Fortune 500 companies do it and people in the EITC zone do it.

quote:

---

I came here for help.

---

Sorry this turned into a dogpile for you, but you kind of asked for it. I wish you and your young family the best - I certainly received government assistance, including EITC (and Pell grants, SNAP and low income housing) when I was a young college student, juggling National Guard, student jobs, 3 young children and, ultimately, law school.

It was always supposed to be short-term, temporary assistance. It has become a lifestyle for multiple generations of some families and dozens of millions of otherwise able-bodied Americans. It is rotting our national soul, IMHO.