Kirsten Gillibrand United States Senator for New York

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Cutting Middle Class Taxes

Cutting Middle Class Taxes

Senator Gillibrand fought hard to secure a broad range of tax cuts for middle class families. In addition to the federal Property Tax Deduction, and the Child, Tuition, and First-Time Home-Buyer tax credits, Senator Gillibrand helped cut taxes for 93 percent of New Yorkers through the “Making Work Pay” tax credit that was included in the American Recovery and Reinvestment Act.

Click here for county-by-county estimates of how many middle class New York families qualified for the “Making Work Pay” tax credit.

To create more opportunities for middle class families and help them save more across the board, Senator Gillibrand fought hard last year to make the following tax deductions and resources available for 2009 tax returns:

Keeping More of What We Earn

Making Work Pay Tax Credit
The Recovery Act included the $400 Making Work Pay Tax Credit for working individuals. The tax credit was automatically included for most workers to ensure middle class workers receive this tax cut immediately. However, workers who did not receive a deduction in their withholding or who may have lost their job before they received the full value of the credit should be sure to claim it on their returns. 

Earned Income Tax Credit
The Recovery Act also included the Earned Income Tax Credit – a refundable tax credit to help lower-income taxpayers. The credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children.  The Recovery Act expanded the maximum benefit for families with more than three children to $5,657.

Unemployment Benefits
In addition to helping workers keep more of their paychecks, the Recovery Act is also helping New Yorkers who have lost their jobs keep more of what they collect in unemployment benefits. Individuals receiving temporary unemployment benefits receive the first $2,400 tax-free.  Most beneficiaries should have received this benefit in a reduction in their withholding, but those who did not should be sure to deduct it in their taxes.

Making Life Affordable for Middle Class Families

First Time Homebuyer Tax Credit
Senator Gillibrand helped pass the First Time Homebuyer Tax Credit as part of the Recovery Act, and passed legislation in October to extend it into 2010 and expand it for more buyers. Individuals who bought a home and have not lived in a residence they owned for the past three years are eligible for this $8,000 credit, which will also be available this year through the end of April. Existing homeowners are now eligible for a tax credit of $6,500.

The First Time Homebuyer Tax Credit has been a driving force to shore up the housing market and spur new buyers. In fact, home sales jumped 5 percent in 2009, with the First Time Homebuyer Tax Credit fueling sales. New home sales continued rising last month by 3.8 percent, according to estimates from U.S. Commerce Department economists.

Property Tax Deduction
Senator Gillibrand introduced bipartisan legislation last year that expanded and made permanent federal property tax relief for New Yorkers who do not itemize their federal tax deductions. The enhanced deduction would offer new tax relief for up to 30 million homeowners across the country.

Before 2008, only taxpayers who itemized their deductions could claim a deduction for state and local property taxes. The Housing and Economic Recovery Act that Congress passed in 2008 temporarily allowed non-itemizing taxpayers to deduct their property taxes. However, this deduction was capped at only $500 and expired at the end of 2009. Senator Gillibrand’s legislation would lift the caps and makes the property tax relief permanent.


New Car Purchases
Anyone who purchased a new car in 2009, including through the Cash for Clunkers program, is eligible to deduct the state and local sales tax on their purchase.  To claim the credit, families must earn less than $260,000 and $135,000 for joint filers.

Child Tax Credit
Working families have been especially hard hit by the recession – for example, the cost of child care is rising $730 each year. To ease the burden on working parents, the Recovery Act expanded the Child Tax credit, which offers a tax cut of up to $1,000 for each child for many New York families by making it fully refundable and increasing the amount of income that families can count toward the credit.

American College Opportunity Tax Credit
The high cost of college tuition has put the dream of higher education out of reach for too many of New York’s brightest, hardest working students. To make college affordable for every student, the Recovery Act created the American College Opportunity Tax Credit, allowing families to claim a credit for the cost of a student’s college tuition and required course materials. 
The credit is capped at $2,500 per student for four years.  The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels.