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Making Work Pay Tax Credit Eligibility & Qualifications Explained

By Kira Botkin

making work pay tax credit

First introduced in 2009, the Making Work Pay tax credit was available for two years – 2009 and 2010. With this credit, you were able to receive a bonus of up to $400 (or $800 if you filed as married filing jointly) just for working.

However, this tax credit was not renewed by Congress following 2010, and is not available for tax years 2011 and later.

How the Making Work Pay Tax Credit Is Calculated

If you had any income from a job or self-employment during the years this credit was available, you can calculate your Making Work Pay credit based on your earned income. You also must file Schedule M to claim the credit – even if you received it as an income boost in your paycheck.

  • If you are filing as married filing jointly and, between you and your spouse, had at least $12,903 of earned income, you can take the full $800 credit.
  • If you are filing as any other status and you had at least $6,451 of earned income, you can take the full $400 credit.
  • If you earned less than the amount for your filing status, take the amount you earned and multiply it by 6.2%. That amount is what you can claim as your Making Work Pay credit on your 1040.

In some circumstances, calculating your credit isn’t so clear-cut. Follow the instructions on Schedule M if you:

  • Had a net loss from a small business
  • Received a taxable college scholarship or a fellowship grant not reported on your W-2 form
  • Received any money as pay for work while you were an inmate in prison
  • Received a pension or annuity from a non-qualified deferred compensation plan or a nongovernmental 457 plan
  • Are filing Form 2555 or 2555-EZ (foreign earned income)

The credit begins to phase out if your modified adjusted gross income (MAGI) is $150,000 and you file as married filing jointly. If you file as any other status, it phases out once your MAGI reaches $75,000. You won’t get any credit at all if you file jointly and your MAGI is $190,000 or more. For all other taxpayers, the credit phases out once MAGI reaches $95,000

Important Notes on Eligibility

  • You can claim this credit even if all of your income is self-employment income.
  • You can only claim the full amount of this credit if you earned more than $6,451 if filing as single, head of household, or married filing separately, or more than $12,903 if you file as married filing jointly.
  • If you file as married filing jointly, you may still claim up to an $800 credit even if only one of you had earned income that year.
  • You cannot take this credit if you can be claimed as someone else’s dependent.
  • If you received an economic recovery payment in 2010, you must subtract that money from the amount of the credit you qualify for. For instance, if you received a $250 economic recovery payment and you qualify for the full $400 credit, you would only be eligible to claim $150 on your 1040. (This payment was for individuals receiving government benefits such as Social Security, SSI, railroad retirement benefits, or veterans’ disability or pension.)
  • You cannot take this credit if you are a nonresident alien.
  • Both you and your spouse must have a valid social security number to claim this credit if you file jointly.

Final Word

Though the Making Work Pay tax credit has been discontinued, you have three years to amend returns from the due date of your original return or two years from the date you paid the tax – whichever is later. Therefore, there may still be time for you to take advantage of this otherwise extinct tax credit.

Have you taken advantage of the Make Work Pay credit? What are your thoughts on this tax credit?

(photo credit: Shutterstock)

Kira Botkin
Kira is a longtime blogger and serial entrepreneur who enjoys gardening, garage sales, and finding stray animals. She lives in Columbus, Ohio, where football is a distinct season, and by day runs a research study for people with multiple sclerosis. She hopes that the MoneyCrashers team can help you achieve your goals and live a great life.

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  • http://onenewvoice.blogspot.com One New Voice

    Thanks so much for the information. I am self employed and I

  • R Guttier

    Hi:

    what do you mean by fellowship? I get a fellowship but it is reported in w-2 form. So am I eligible for making work pay credit?

    Thanks for your great help!

    RG

  • Kira Botkin

    Yes, fellowships are mentioned because sometimes the money isn’t reported to you on a W-2. If your fellowship money was reported on a W-2 in box 1, it is being reported as earned income, so you would be eligible. If you earned at least $6,451 this year, you are eligible for the full credit.

  • Guest

    My mother-in-law listed my husband as a dependent on her 2009, and we got married in the summer of 2009. No one claimed me on their taxes in 2009. Combined we only made $2000, and I haven’t filed the 2009 taxes yet but will soon. From my understanding, the phrase “You cannot take this credit if you can be claimed as someone else’s dependent.” talks about the first name on the return (the spouse who is filling it out), so if I file the return in my name, then we are eligible for this credit (since can’t be claimed on anyone’s return), but if my husband fills out the return in his name (and puts me on the second line as a spouse), then we won’t be eligible for this credit. Is that correct? Or does it mean if either one of us can be claimed on someone’s return, we cannot use the credit?

    • Kira Botkin

      Whose name is first on the return has no bearing on it – if either of you is claimed as someone’s dependent, and you are filing as married filing jointly, you cannot take the credit. From the Schedule M instructions – “If you are married and claim the making work pay credit on a 2010 joint return, neither you nor your spouse can be claimed as a dependent on anyone else’s 2010 return.” (This says 2010 but also applies to your 2009 return, which I hope you are filing very soon!)

      So your second statement is correct – if either of you is claimed as a dependent, you can’t use the Making Work Pay credit. Given that your credit would only be $124 with an income of $2000, having your mother-in-law take your husband as a dependent is probably a good move.

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