Making Work Pay Tax Credit

What is the Making Work Pay Tax Credit?

The Making Work Pay Tax Credit is a new temporary credit which is worth up to $400 depending on the taxpayer’s earned income and whether they received the economic recovery payment in 2010.  

This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

How will I be affected by the making work pay tax credit?

Most wage earners will benefit from larger paychecks in 2009 and 2010 as a result of the changes made to the federal income tax withholding tables to implement the Making Work Pay tax credit. However, some people may find that the changes built into the withholding tables result in less tax being withheld than they prefer. 

If you’re not eligible for the Making Work Pay tax credit, withholding changes could mean a smaller refund next spring. A limited number of people, including those who usually receive very small refunds, could in some situations owe a small amount rather than receiving a refund. Those who should pay particular attention to their withholding include:

• Pensioners
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers without valid Social Security numbers