Wisconsin Department of Children and Families

Protecting Children, Strengthening Families, Building Communities

 

 

Tax Credits

There are a number of federal and state tax credits available to eligible W-2 working families that can reduce their tax burden and increase income.

Federal and Wisconsin Earned Income Tax Credits

The Earned Income Tax Credit (EITC) is available to working individuals who have low or moderate income. To qualify for EITC, individuals must have earned income from employment or self-employment. When the EITC exceeds the amount of taxes owed, this results in a tax refund. To qualify, individuals must meet certain requirements and file a tax return, even if they do not owe any tax or are not required to file.

Note: W-2 paid placement benefits (i.e. Community Service Job [CSJ], W-2 Transition [W-2 T], At Risk Pregnancy [ARP], Stipends for Noncustodial Parents [TSP], and Custodial Parent of an Infant [CMC] payments) are not considered earned income and are not subject to income tax credits. However, employment outside of W-2 and any pay received from an employer by a W-2 Transform Milwaukee Jobs, Transitional Jobs, or Trial Employment Match Program (TEMP) participant during 2016 should be applicable for earned income credits.

Federal tax refunds will not disqualify working families from W-2 because it is disregarded income. All Federal tax refunds will not be counted as income or as an asset for 12 months when determining an individual’s eligibility or benefit amount for W-2, Job Access Loans, Emergency Assistance, Transform Milwaukee Jobs/Transitional Jobs, Child Care, FoodShare, BadgerCare Plus, Medicaid, Family Planning Only Services, and Caretaker Supplement.

Working individuals may be eligible for both Wisconsin and federal tax credits if they worked any time in 2016. They may be able to get a combined total of state and federal credits up to:

  • $8,400 if they have three or more children and family income less than $47,955 (single), $53,505 (married).
  • $6,185 if they have two children and family income less than $44,648 (single), $50,198 (married).
  • $3,508 if they have one child and family income less than $39,296 (single), $44,846 (married).
  • $506 if they do not have any children and family income less than $14,880 (single), $20,430 (married).

For more information on the federal EITC, please visit the federal EITC Information page or IRS Publication 596. For more information on the Wisconsin EITC, please visit the Wisconsin Department of Revenue's EITC website.

The Internal Revenue Service has an interactive tax assistant that assists individuals with determining if they can claim the EITC and with calculating the amount of the credit.

Wisconsin Homestead Credit

The Wisconsin Homestead Credit (HC) is available to low income Wisconsin residents who rent or own their home. The credit may lessen the impact of property taxes and rent on individuals with lower incomes. Working individuals may be eligible for up to a maximum tax credit of $1,168 if they were a Wisconsin resident for all of 2016 and can provide copies of rent receipts (if renting) or property tax receipt (if own home) and their family income was less than $24,680 for 2016.

The following terms apply to individuals who received a W-2 payment (Community Service Job [CSJ], W-2 Transition [W-2 T], At Risk Pregnancy [ARP], Stipends for Noncustodial Parents [TSP], or Custodial Parent of an Infant [CMC]) in tax year 2016:

  • If an individual received any amount of a W-2 payment in 2016 for any month in 2016, the individual’s property taxes and rent are reduced by one-twelfth for each month the individual received payment.
  • If an individual received a W-2 payment for all 12 months of 2016, the individual is not eligible for the HC.

For more information on the HC, refer to the Wisconsin Department of Revenue's Homestead Credit Common Questions page.

Federal Child Tax Credit

The Child Tax Credit (CTC) is designed to assist working families by offsetting the cost of raising children and is available to families with a qualifying child. Working families may be eligible for up to maximum federal tax credit of $1,000 per dependent child. If the amount of the CTC is greater than the amount of income tax a family owes, the family may receive part or all of the difference as an additional CTC.

The IRS has an interactive interview that assists families with determining if they are eligible for the CTC.

Filing Taxes for Previous Years

Individuals who have never filed or have not filed their returns in past years may file for tax credit refunds for the last three years (i.e. 2013, 2014, and 2015). If applicable to their situation, they would still be eligible to receive EITC and CTC credits for those previous years.

Visit this page for more information on how to file a tax return for a prior year or call the IRS Tax Help Line at 1-800-829-1040.

Tax-Related Scams

The IRS maintains a webpage listing common scams taxpayers may encounter at any time during the year. In 2016, many taxpayers reported receiving threatening calls from someone claiming to be from the IRS and demanding that they pay money that they owe on their taxes. Another major scam included e-mails from the IRS or tax software companies, indicating that the recipient needed to update their personal information. In an effort to help protect taxpayers from tax scams, the IRS has stated that “The IRS doesn't initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information. In addition, the IRS does not threaten taxpayers with lawsuits, imprisonment, or other enforcement action.”

For more information regarding Tax Scams/Consumer Alerts, visit the IRS Tax Scams/Consumer Alerts page. To report tax-related scams, visit the Report Phishing and Online Scams page.

Tax Information in Other Formats

The IRS website, in addition to English, can be displayed in Spanish, Chinese, Vietnamese, Korean, and Russian. To receive free over-the-phone interpreter services, call 1-800-829-1040. To use a Telecommunications Relay Service for persons with hearing or speech disabilities, dial 711.

Tax Preparation Resources

Volunteer Income Tax Assistance

The Volunteer Income Tax Assistance (VITA) program is available to low income individuals in preparing their tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals in local communities. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping centers, churches, retirement homes, and other convenient locations. Most VITA sites are open from February 1 through April 15.

To find a VITA site, call 211 or visit the VITA Website.

Fees and Commercial Tax Preparation

Some tax preparation companies offer money up-front to individuals seeking tax returns, often based only on the last paycheck of 2016. News articles indicate that some of these companies can charge very high interest (e.g. 30% up to 60%) rates and fees. As a result, individuals can lose much of their tax refund.

W-2 participants should be knowledgeable about these types of tax preparation services, however, they should not to sign anything without fully understanding the terms and conditions of the contract.