What is the Making Work Pay Tax Credit?

The Making Work Pay tax credit was part of the American Recovery and Reinvestment Act of 2009, to help reduce some of the financial burden of most taxpayers, which had principally been caused by the economic downturn of 2008. It was only available for the years 2009 and 2010 and had to be claimed on income taxes by those who were eligible. It had very set limits as to who could claim the credit, but these were relatively generous, allowing many to claim a full or, at least, a partial credit that was fully refundable.

Those eligible for the Making Work Pay tax credit were people who received income from jobs or through self-employment. They had a modified gross adjusted income (MAGI) of no more than $95,000 US Dollars (USD) a year if they were single and $190,000 USD a year if they were married filing jointly. Taxpayers who were single and made more than $75,000 USD or who were married, filing jointly and who made at least $150,000 USD might qualify for a smaller amount of the credit.

The full amount of the Making Work Pay tax credit was $400 USD, if a person was entitled to the full amount, or $800 USD for married couples filing jointly. As stated, this is a refundable credit. This means that if a person filing taxes owes no money that reduces the credit, the government would owe him $400 USD. Many people who claimed the credit were able to get at least a partial amount back or could reduce the amount of taxes they owed at the end of the year.

In order to correctly claim the credit, people needed to file a Schedule M with their taxes. Failure to file this form might mean that the credit was invalidated. Some people with very high incomes also found that instead of taking a credit they would end up owing a small amount.

The Making Work Pay tax credit was only meant to be temporary and there have been other tax-cutting measures put in place since 2009. Some of these lower the amount of taxes that most people in these income brackets have deducted from their take-home pay. When these additional tax breaks took effect, especially in 2010, they rendered the Making Work Pay program redundant. In 2010, taxpayers who were able to claim this credit were doubly advantaged because they benefited from fewer taxes being paid in the year and also from the credit.