What the American Taxpayer Relief Act of 2012 means for military families
By Capt. Lesley Woods, 82nd Training Wing Legal Office
/ Published February 12, 2013
SHEPPARD AIR FORCE BASE, Texas --
On 2 January, 2013, Congress passed the American Taxpayer Relief Act of 2012 and effectively preserved the Bush era tax cuts for the middle class, while raising them for the highest brackets of tax payers. The good news is that most, if not all, of military families will fall in the tax brackets whose rates will not be raised, and the bill preserves those tax rates for the next five years. The bill also impacted many of the common credits and deductions that apply to military families.
One of those credits is called the American Opportunity Credit, which is essentially a tax credit for education expenses that apply to money spent on college tuition. The maximum credit is $2,500 per tax year. Keep in mind that a tax credit is even better than a tax deduction because deductions just lower your taxable income while credits lower the actual number of dollars that you pay in taxes. The new statute extended the American Opportunity Credit for the next five years. There are limitations to how often it can be claimed and to what education based expenses qualify, but if you have your taxes done at the Sheppard legal office, the volunteers are well versed in this credit and can help you determine if your family qualifies.
Even if you do not qualify for this tax credit, you likely will meet the standards for the other education credit, known as the Lifetime Learning Credit. Be sure to mention education expenses to your tax preparer and to keep an eye out for any 1098 tax forms that come in the mail from the college that you or your dependents attended.
Another credit that was extended is the Child Tax Credit, and military families qualify for this tax break when they have a child under the age of 17, who is a US citizen or national, can be claimed as a dependent, lived with the service member for more than half of the year, and if the child did not provide more than half of his or her own support and is related to you. This credit is good for up to $1,000 per qualifying child. Again, the legal office volunteers can assist you in determining if your children qualify you for this credit.
The last credit that every military family should know about, and that was also renewed by this bill, is the Earned Income Credit. This credit is more complex, and there are many variables depending on the situation of your household. It is based on your adjusted gross income in relation to your filing status and the number of qualifying children in your home. The max credit for a service member with one child is $3,169, and the credits go up by the number of qualifying children in the home until you have three or more qualifying children.
Wherever your taxes are prepared, make sure that the tax preparer considers your eligibility for any of the credits described in this article. It can add up to big savings.
If you would like to have your taxes prepared at the local legal office, free of charge, the Sheppard Tax Center is open from 9 a.m. to 3:30 p.m. Monday through Friday, and has extended hours on Tuesday nights for Airmen in Training and instructors from 4:30 p.m. to 6:30 p.m. No appointments are necessary, and everyone is seen on a walk-in basis. Please bring all of your required documents and bank account information with you.