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Chapter 6. Income Taxes > Tax Credits

Tax Credits

Tax credits are even more attractive than tax deductions because a credit comes right off the amount you would otherwise have to pay in taxes, whereas a deduction merely reduces the amount of your income that is subject to tax. The good news is that the Internal Revenue Code provides a special tax credit for the elderly or disabled. The bad news is that hardly anyone qualifies for this tax credit. Maybe those Congressmen do not have parents after all.

The amount of the credit for income taxes starts at $5,000 for single taxpayers or those filing as head of household; $5,000 if you are filing a joint return and only one of you is over sixty-five years old; $7,500 if you file a joint return and both of you are over sixty-five or permanently and totally disabled, and $3,750 if you are married and filing separately. These amounts, by the way, were set in 1983 and have, unlike Congressional pay raises, never been indexed for inflation, thus making them much less helpful than they originally were so many years ago.


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