When you are preparing your federal income tax return, you should be aware that there are many different tax credits available to taxpayers. We are going to focus here on some of the more common ones to take advantage of.
1.Child Tax Credit
The tax law allows you take a $1,000 credit for each dependent child (under age 17 by December 31st of the filing year), against taxes owed. Remember this is not a deduction, this is a CREDIT. A credit reduces your income tax dollar for dollar, and thus is extremely advantageous. This credit does, however, begin to phase out at $110,000 adjusted gross income for joint filers, and $75,000 adjusted gross income for single filers.
2.Education Credits
There are actually two credits available, depending upon your situation.
A.The Hope Credit
The Hope Credit is available to students in their first two years of college (freshman and sophomore year) or vocational school. The maximum amount of credit available is $1,650. The expenses that you may include in the calculation of this credit is basically just the cost of tuition.
B.The Lifetime Learning Credit
The Lifetime Learning Credit is available for all years of education past high school, and for courses to acquire or improve job skills. It's available for an unlimited number of years. The student does not need to be pursuing a specific degree or course of study to obtain the credit.
Be aware, however, that if you file married separately, or if you can be claimed as a dependent on someone else's return (i.e., your parent's), you cannot claim either of the education tax credits. Both credits are subject to phaseouts depending on your income.
Home Energy Efficiency Improvement Tax Credits
Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $500.
There is also available a credit equal to 30% of qualifying expenditures for purchase for qualified photovoltaic property and for solar water heating property used exclusively for purposes other than heating swimming pools and hot tubs. The credit cannot be more than $2000.
Improvements must be installed in or on the taxpayer's principal residence in the United States.
Using a computerized tax preparation program can help you make sure that you claim every deduction that you are allowed. A program like TurboTax Online will help you keep your money legitimately in your hands, not the governments.
Comments