Tax credits helps make filing taxes a little bit easier. They help offset costs related to having kids, getting a higher education and even owning a home. Some tax credits are even refundable which means you’ll receive a refund even if your taxable income is zero. As you’re preparing for the upcoming tax season, here are six of the most popular tax credits you could qualify for.
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One of the most popular credits is the Earned Income Tax Credit (also known as EITC). This credit is made available to individuals and families who are unable to have a full-time workload or simply earn a lower income class wage. It’s designed to aid in providing for your family with quite a large tax refund every year. To see if you’re eligible for the Earned Income Tax Credit, use the EITC Assistant from the IRS.
Another helpful tax savings comes in the form of the Child Tax Credit, which is available for taxpayers with dependent children age 16 or less. The Child Tax Credit can be as much as $1,000 per eligible child. The exact amount you qualify for depends on the income earned in the past year.
In the event that your taxable income is already reduced to zero, you could qualify for the Additional Child Tax Credit which may give you a refund, not just reducing the taxes you owe.
Caring for a child is an expensive endeavor, especially when it comes to daycare and babysitting expenses. Because of this, the government created the Child and Dependent Care Credit to help alleviate these exorbitant costs. This credit is available to taxpayers who work, or are looking for work, and must pay for childcare expenses for dependents under the age of 13.
It’s also available to individuals who are responsible for paying for an elderly parent or dependent child who is unable to care for themselves. The Child and Dependent Care Credit provides up to 35% of qualifying expenses, depending gross income.
Any contributions you make to qualified retirement accounts throughout the year could qualify you for the Saver’s Tax Credit (formerly known as the Retirement Savings Contribution Credit). This credit matches up to 50% of the amount you save in a retirement plan, such as a 401K or IRA, up to $4,000 (or $2,000 for single filers). This credit begins to be phased out the more income you earn but every little bit helps when saving for your future.
You don’t have to be a college student to qualify for a reimbursement of your higher education costs. With the Lifetime Learning Credit, you can offset the cost of post-secondary education expenses. This is available for years following a four-year degree or other university-type education.
In other words, it’s available to individuals pursuing additional certifications or furthering their education, not tied to a degree. The Lifetime Learning Credit may be as much as $2,000 per eligible student and is available for single taxpayers who earn $55,000 or less, or married filers earning $110,000 or less per year.
With more and more awareness being made on the advantages of clean energy, you may qualify for tax credits to offset the cost of energy-saving costs. Common energy-saving projects that are eligible for various credits include installing windows, energy-efficient appliances and air conditioning units as well as upgraded insulation. The maximum credit allowance for these smaller costs is $500, while you could get up to 30% of the cost for larger installations like solar panels and solar water heaters.
When determining what tax credits you could qualify for, start with the most popular ones. It’s easy to overlook these common tax savings, but they will nonetheless help reduce your overall tax bill and increase your tax refund.