What Is the Making Work Pay Tax Credit?

Definition: Making Work Pay Tax Credit


The Making Work Pay tax credit is a provision in the economic stimulus bill signed last week, formally known as the American Recovery and Reinvestment Act. While the stimulus package enacted under the Bush administration sent Americans paper rebate checks in the mail, this provision will provide taxpayers with a refundable tax credit that will show up in their paychecks beginning early this Spring.

According to the IRS, the tax credit will be calculated at a rate of 6.2 percent of earned income, and will phase out for taxpayers whose adjusted gross income exceeds $75,000, or $150,000 for married couples filing jointly. The tax credits will come out to a maximum $400 for working individuals and $800 for married taxpayers filing joint returns, and the amounts will be handled through automated withholding changes. For more information on the Making Work Pay tax credit, visit the IRS website.

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