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Tax credits

Name

Institution affiliation

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Tax credit

Governments often require individuals to pay taxes. In cases where individuals or

organizations owe a government and have a tax credit, the credit can be subtracted from the

taxes. The subtractions are often termed as tax credits. However, the eligibility for these credits

dramatically depends on various factors. There are various types of tax credits available in the

United States some eligible to individuals while others to organizations. Some of the tax credits

eligible to individuals include child tax credit, earned income tax credit, and savers credit, among

others. While there are various types, earner income tax credit is considered to be beneficial to an

individual.

Earned income tax credit is considered among the nonrefundable credit that is meant to

encourage the low-income earners to save towards their retirement. If a person qualifies for this

credit, they are eligible for additional funds depending on their earnings. Through this credit, the

individual depending on their income, an individual can be eligible to form 8880 on top of their

1040 (Nichols, & Rothstein, 2015). While the earned income tax credit is beneficial to the

individual, it serves a great benefit to the federal government. Through this credit, the individual

family can benefit. Currently, there are a growing number of elderly people in the country which

requires family members to care for. However, if a person effectively saves towards their

retirement, they can gain enough funds to enable them to fend for themselves during their old

age. Furthermore, one of the benefits one the earned tax credit is that it benefits the poor in the

country. In this case, it improves the economy of the country by ensuring that all citizens gain a

stable income throughout their lives, according to Nichols, & Rothstein (2015).

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In conclusion, earned income tax credit benefits not only the individual but also the

economy and the family members of the recipient. The recipient will not have to depend on the

government and family members to provide for them after retirement.

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References

Nichols, A., & Rothstein, J. (2015). The earned income tax credit. In Economics of Means-

Tested Transfer Programs in the United States, Volume 1 (pp. 137-218). University of

Chicago Press.