Posts Tagged ‘tax credits’

Who really benefits from the “Safety Net”

Posted on: February 15th, 2012 by

A new analysis from the Center on Budget and Policy Priorities underscores that the poor are no longer the primary beneficiaries of the government safety net.  Terms like entitlements, government benefits, and safety net often conjure images of tax dollars sliding from the hands of the wealthy into the pockets of the poor.  But as reported by The New York Times, Saturday, that image is badly outdated.  Benefits are now flow primarily to the middle class.

Eric L. Bach - CPA - Rockville, MD

The center’s study found that the poorest American households, the bottom fifth, received just 32 cents of every dollar of government benefits distributed in 2010.  The finding is broadly consistent with the data reported Sunday that the poorest households received 36 percent of benefits in 2007, down from 54 percent in 1979, numbers that came from a study published last year by the Congressional Budget Office.

While the findings are not directly comparable because of differences in methodology, the new study suggests that the recent recession did not cause any significant increase in the share of benefits flowing to the poor, as might once have been expected.  The study found that older people received slightly more than half of government benefits, while the non-elderly with disabilities  received an additional 20 percent.  These benefits are not means tested, but rather, better-paid workers get more in Social Security.

Furthermore, the study notes that politicians have shifted benefits away from the “jobless poor,” through reductions in traditional welfare, and increased benefits for working families, for example through tax credits.  The government also also expanded elegibility for benefit programs.

“The safety net became much more work-based,” wrote Arloc Sherman and his collaborators at the center, a left-leaning research group.  “In addition, the U.S. population is aging, which raises the share of benefits going to seniors and people with disabilities.”

Another finding of the study is that the distribution of benefits no longer aligns with the demography of poverty.  African-Americans, who make up 22 percent of the poor, receive 14 percent of government benefits, close to their 12 percent population share.  White non-Hispanics, who make up 42 percent of the poor, receive 69 percent of government benefits… again, much closer to their 64 percent population share.

Tax Breaks Likely to be Extended

Posted on: May 26th, 2010 by

CPA RockvilleMuch of the recent legislative action in Washington has been focused on health and financial reforms.  But another bill dealing with tax issues appears to be in the works as well.  It is expected to be enacted sometime in the next week.  The American Jobs and Closing Tax Loopholes Act will provide one year extensions to a number of tax rules that expired at the end of last year.  The extenders will be made retroactive to the beginning of 2010.  Some of the more notable extensions include:

Property Taxes – The additional standard deduction on real property taxes, $500 for individual filers and $1000 for couples, will be extended.  This is for use by people who don’t itemize their deductions.

Higher Education Deduction – Up to $4000 of qualified higher education tuition and related expenses could be taken as above-the-line deductions.  There are income limitations on who may take this deduction and it’s not available if the expenses are deductible under any other tax program.

Teacher Classroom Supplies Deduction – Up to $250 in out-of-pocket spending on qualifying classroom supplies may be taken as an above-the-line deduction.  On top of that, teachers who itemize their taxes may be able to deduct qualifying expenses that exceed $250 by classifying them as employment related miscellaneous itemized deductions.

Hybrid Vehicles – An alternative motor vehicle credit will continue to be available for hybrid vehicles.  Separate credits are available for cars and light trucks, and for medium and heavy trucks.

Energy Efficient Windows – The bill will modify the terms of the tax credits for energy efficient windows to reflect regional climate differences.

Disaster Relief – A number of programs will be extended to help taxpayers affected by federally declared disasters, including higher allowable loss limits for deductions and a five year carry-back provision for net operating losses.  This could prove to be very important with the hurricane season meteorologists are predicting.

Healthcare Reform: What It Means to Retirees and Self-Employed

Posted on: April 1st, 2010 by

Eric L. Bach & Associates - Rockville, CPAThe new healthcare reform bill doesn’t mean  a lot to workers who receive employer-sponsored coverage, but for those that buy individual insurance on the open market, it changes a lot.  Six months after enactment, health insurers cannot place lifetime limits on the value of coverage or revoke existing coverage.  Starting in 2014, insurers must accept all applicants, including anyone with preexisting conditions.  Until then, individuals with preexisting conditions who have been uninsured for more than 6 months will be eligible to enroll in a new national high-risk pool and receive subsidized premiums.

Another big change effecting this population is the requirement to be insured or face a monetary penalty.  Early retirees and self employed individuals are going to be able to purchase coverage through state based plans.  Tax credits will be made available to individuals and families with income between 133-400% of the poverty line.  You should speak to your local CPA about these tax credits.

Lastly, if you are 55 years of age and are enrolled in an employer sponsored retiree health plan, your costs may soon be lowered.  Under the government reinsurance program, employers will be reimbursed for 80% of retiree claims between $15,000-$90,000.  The program will end on January 1, 2014.  Speak to your insurance liaison to help pick the most beneficial plan for you.