Oakton,
Va., March 2, 2004—As
economists and government officials are
finding ways to rev up the nation’s economic
engine, consumers on tight budgets are looking
for ways to reduce their debts and boost
their incomes. According to the Federal
Reserve, consumer debt topped $2 trillion
in 2003 and average household credit card
debt is nearly $8,500. But, during the current
tax season many taxpayers will be able to
convert some new tax credits into cash to
help them dig out of deep debt and build
a better foundation for their financial
future.
“We encourage consumers to learn more about
the kind of tax credits they may be eligible
to receive,” says Credit Counseling Coordinator,
Adriana Sanchez. Northern Virginia Family
Service (NVFS) is a member of the National
Foundation for Credit Counseling, the nation’s
largest and longest-serving nonprofit credit
counseling organization. “Tax refunds are
an excellent source of extra funding that
can go a long way in helping consumers pay
off high winter utility bills, lingering
holiday debt and unplanned or emergency
expenses.”
Taxpayers
should be aware of important changes to
the tax law, including those announced under
the Jobs and Growth Tax Relief Reconciliation
Act of 2003, before completing a federal
income tax form. Review the Internal Revenue
Service website at www.irs.gov
or consult with IRS representatives or tax
specialists to learn more about these and
other federal tax credits.
Revised
Tax Rate Schedules: The 2003 Tax Rate Schedules:
The 10% tax rate applies to taxable income
up to $7,000 for single taxpayers and married
taxpayers filing separately ($14,000 for
married taxpayers filing jointly and qualifying
widow(er)s; $10,000 for head of household).
Tax rate brackets for single and married
taxpayers have also changed.
Standard
Deduction: The basic standard deduction
for married taxpayers filing jointly and
qualifying widow(er)s has increased to $9,500
(twice that of single filers). The standard
deduction for married taxpayers filing separately
has increased to $4,750 (the same as that
of single taxpayers).
Child
Tax Credit: The maximum child tax credit
has increased from $600 to $1,000 per child.
Many people received a check for an advance
payment of the increased portion of the
child tax credit, up to a maximum of $400
per child. Any advance payment received
reduces the amount of the child tax credit
the taxpayer can claim on the 2003 tax return.
However, any advance payment received that
is more than the child tax credit for 2003
does not have to be paid back.
Alternative
Minimum Tax: The alternative minimum tax
exemption amount has increased to $40,250
for single taxpayers and taxpayers filing
as head of household; $58,000 for married
taxpayers filing jointly and qualifying
widow(er)s; and $29,000 for married taxpayers
filing separately.
Lifetime
Learning Credit: The maximum deduction of
the lifetime learning credit for 2003 is
$2,000.
Make
the Most of Your Tax Refund…
Last year, almost three out of every four
taxpayers received a tax refund, averaging
more than $2,050, according to the Internal
Revenue Service. But history indicates that
the majority of consumers spend their reclaimed
money less than a month after receiving
it. Once that refund check is “in the mail”
or is “money in the bank” avoid unnecessary
and excessive spending. NVFS advises taxpayers
to use their infusion of cash to:
·
Pay down credit card debt, starting with
accounts with high interest rates and high
balances. Remember, credit card debt is
another form of an unsecured loan. The longer
the life of the loan, the more money you’ll
pay to borrow the money.
·
Make an additional payment on secured debt,
such as a mortgage or automobile. Applying
an extra payment to principle balances shortens
the length of these loans as well. Planning
to buy a home? Refunds are an ideal source
for down payment funds.
·
If you’re an entrepreneur, consider setting
aside funds towards your next tax payment?
·
If your “rainy day” fund is experiencing
a drought, boost your savings by depositing
funds into an interest bearing savings account
or a money market fund. Remember to always
plan ahead for emergencies and unexpected
purchases. You never know when your truck
or car will call it “kaput” or your washing
machine or refrigerator will call it quits!
·
Lastly, consider contributing to an IRA,
medical savings account or a 529 college
savings plan. These are great sources for
savings that will help any taxpayer build
a brighter financial future.
To
schedule a confidential appointment with
the NFCC member agency nearest you, call
703.385.3267.
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