Tax Tips & Calculators

If you are retired, disabled or unemployed, have special needs, or meet certain income requirements, there could be government programs to help you. Many kinds of assistance are available, including cash support, medical coverage, help paying utility bills, help getting loans for education or homeownership, job training, unemployment insurance and more.

Many forms of government assistance aren't taxable. Some of them are discussed here. Certain tax credits can help low- and moderate-income families save money.

Employment Assistance

The amount of unemployment compensation over $2,400 received by each individual is taxable. Unlike wages, no tax is withheld from unemployment unless you specifically request it by submitting a completed Form W-4V - Voluntary Withholding Request to the unemployment office where you applied for benefits. Once your request is processed, 10% of your benefits will be withheld for federal taxes. Also, you may be able to deduct some of the expenses of finding your next job. Read our article on job search deductions.

Another type of employment-related assistance is worker's compensation, which generally isn't taxable.

If you're unemployed and need temporary financial assistance or help finding a new job, you may be interested in programs offered by the U.S. Department of Labor:

• Unemployment Insurance
• Regional Employment and Training Administration Offices
• One-stop Career Centers

Education Assistance

There are many federal and state programs to help eligible families meet expenses for education. You must fill out and submit the Free Application for Federal Student Aid (FAFSA) to determine eligibility for federal aid. Also, check out our article on college financial aid.

For 2009, you can claim the new American Opportunity Credit. The maximum credit of $2,500, of which 40% is refundable, can be applied to qualified education expenses for the first 4 years of higher education. If you have a student who attended school in a Midwestern disaster area, it may be advantageous to claim the nonrefundable Hope Credit. The maximum credit is $3,600. For more, read our article on the American Opportunity and Hope credits.

If you don't qualify for the American Opportunity Credit or Hope Credit, you may qualify for the Lifetime Learning Credit, which can be claimed for 20% of the first $10,000 of qualified expenses, up to $2,000. For more, read our article on the Lifetime Learning Credit.

Public Assistance Benefits

Government payments in the nature of welfare are not taxable if they are based on need. Welfare payments for services performed are taxable.

Post-disaster grants received under the Disaster Relief and Emergency Assistance Act are not taxable if the payments are made to help you meet necessary expenses or serious needs for housing, medical and dental care, transportation, or funeral expenses. You can't deduct medical expenses or casualty losses for which you were specifically reimbursed under this program.

Payments received for a disaster that results from a terrorist or military action, from a federally declared disaster, a disaster resulting from an accident involving a common carrier (such as an airline), or any other disaster determined to be catastrophic by the Secretary of the Treasury generally are not taxable. Disaster payments received from state or local governments based on the provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act are not taxable.

Mortgage assistance payments under section 235 of the National Housing Act are not taxable. You can't deduct interest that is paid for you under this program.

Replacement housing payments made under the Uniform Relocation Assistance and Real Property Acquisition Policies Act for Federal and Federally Assisted Programs are not taxable. They are included in the basis of the newly acquired property.

A relocation payment under section 105(a)(11) of the Housing and Community Development Act made by a local jurisdiction to a displaced individual moving from a flood-damaged residence to another residence is not taxable. Home rehabilitation grants received by low-income homeowners in a defined area under the same act are also not taxable.

For details on the type of relief available for specific disaster areas, see our article on disaster relief.

Food and Nutrition Assistance

Several programs are available to help ensure that children, adults and the elderly receive the nourishment they need. Here are a few programs offered by the U.S. Department of Agriculture:

• USDA Food and Nutrition Service
• Supplemental Nutrition Assistance Program (SNAP), previously called the Federal Food Stamp Program
• School Lunch/Breakfast Programs and Summer Food Programs
• Special Supplemental Nutrition Program for Women, Infants and Children (WIC)

Health and Medical Support

Many families need help meeting the healthcare needs of infants and children, or family members who are elderly, disabled or in need of special medical support. For more information, visit the U.S. Department of Health and Human Services or check out these specific programs:

• State Children's Health Insurance Program
• The Head Start Program (for children ages 3 to 5) and Early Head Start Program (for pregnant women, infants and toddlers)
• Maternal and Child Health Services (MCH)
• Medicaid
• Medicare

Home Ownership

Owning your own home can provide an important tax deduction, a long-term investment and a way to escape rising rent costs. First-time homebuyers can receive a tax credit for up to $8,000 and certain homebuyers who already own a home can receive a tax credit of up to $6,500. And homeowners can deduct mortgage interest on their homes. For more information, read our article on home ownership.

The following agencies are designed to help qualified individual and families buy homes:

• U.S. Department of Housing and Urban Development (HUD)
• Federal Housing Administration (FHA)

Utility Assistance

The federal Low-Income Home Energy Assistance Program Block Grant provides federal funds to each state to help eligible households with home heating and/or cooling needs, including utility bills and energy-related repairs. These payments are not taxable.

Check out the U.S. Department of Energy's Web site for complete details on all the programs offered.

Also visit:

• The U.S. Department of Energy's Weatherization Assistance Program (WAP)
• State Agencies
• Low Income Home Energy Assistance Program (LIHEAP)

Tax Credits

If you have earned income, you may be eligible for the Earned Income Credit (EIC), the Child Tax Credit (CTC) and the Saver's Credit.

The EIC reduces the amount of tax you owe or may even get you a refund. The EIC provides up to $5,657 (for 2009) for working families with more than 2 qualifying children and incomes of up to $43,279 ($48,279 if Married Filing Jointly with more than 2 qualifying children) and investment income of $3,100 or less.

For qualifying families, the CTC can be worth up to $1,000 for each qualifying child younger than 17. (The credit is reduced at greater income levels.) You also must meet certain eligibility requirements to claim the credit.

For more on claiming dependents and these tax credits, see our article on baby tax benefits.

If you make an IRA contribution or contribute to certain employer-provided retirement plans, such as a 401(k) plan or the Federal Thrift Savings Plan, you may be eligible for the Saver's Credit. You qualify for the Saver's Credit if you meet the following requirements:

• You're 18 or older.
• You're not a full-time student.
• You aren't claimed as a dependent on someone else's return.
• Your AGI doesn't exceed $55,500 if Married Filing Jointly, $41,625 if Head of Household, and $27,750 if using other filing statuses.

For more information, read our full article on the Saver's Credit.

Social Security and Other Senior Assistance

Social Security taxes pay for retirement, disability, family benefits, survivor benefits and Medicare. The Social Security Administration also administers the Supplemental Security Income (SSI) program for elderly and disabled people who have low income and few assets.

Key Web sites:

• Social Security Administration
• Benefits Eligibility Screening Tool (BEST)
• BenefitsCheckUp
• Eldercare Locator

For more information about government benefit programs, contact an H&R Block tax professional.