Just when you think you’ve got a handle on the best income tax credit for your needs, the IRD comes along and changes the rules! Here in New Zealand, you can claim tax credits for all kinds of things. That way, you can reduce your net income — and, as a result, reduce your tax rate. The basic premise of income tax credits hasn’t changed. For example, if you made $50,000 this year and you have a $5,000 income tax credit, you will still only have to pay taxes on the remaining $45,000. However, the actual credits you can claim are changing. Here’s what you need to know: – The $9,880 income tax credit is gone Before 2012, if you made less than $9,880 in a year, you were entitled to a refund. Now, however, simply making a smaller salary isn’t enough to get money back. Why? According to the IRD, the rule change was long overdue. Back in 1986 (when this tax credit was first introduced), full-time workers who were paid low wages were actually hurt by the tax laws. Today, the IRD says, that’s no longer the case. If you were taking advantage of this income tax credit before, you’ll have to change your tax code to either M or MSL by April 2013.
- The Independent Earner Tax Credit is still alive and well If your income falls between $24,000 and $44,000, you’ll get to take advantage of an income tax credit of $10 per week. If you earn more than $44,000, you’ll still get a tax break — it will just be a smaller one. The amount of your weekly income tax credit will go down by $0.13 for every extra dollar you make. How do you know if you qualify? If you’ve got a tax code of ME or ME SL, don’t get a Working for Families tax credits, Veteran’s pensions, superannuation, or an income-tested benefit, you qualify!
- Your tax rate may have changed OK, so it’s not exactly the same as an income tax credit, but you’ll get to save some money — and isn’t that the point when all is said and done?! Now, if you make more than $70,000 a year, your personal tax rate is down to 33%.
One final thing to remember — when it comes to calculating your income tax credit, a personal summary calculator can be worth its weight in gold. Just be sure to use it BEFORE you request your Personal Tax Summary form. Once you request the form, you’ve got to go along with whatever it says. So, if it determines you owe more money, you’re required to pay it. The MyRefund can help you figure out where you stand so that you don’t end up with a costly surprise!
