Don't Forget Your Tax Credits!

Tax credits are dollar-for-dollar reductions in the amount of tax that's owed, which means that they can be very valuable at filing time. Don't neglect any for which you may be eligible. Although certainly not all-inclusive, some of the more common tax credits are listed below. More in-depth information about them can be found at the IRS' website.

  • Adoption Credit - The adoption credit may be taken for qualifying expenses paid to adopt an eligible child. The credit may be increased for the adoption of a child with special needs. In addition to the credit, certain amounts reimbursed for qualifying expenses by an employer may be excludable from the taxpayer's gross income. See Publication 968, Tax Benefits for Adoption for more information.
  • Child and Dependent Care Credit - This credit is used to offset expenses incurred for the care of children under the age of 13, or for a disabled spouse or dependent, so that the taxpayer could go to work. The total amount of qualifying expenses is limited, with the credit being a percentage of those applicable expenses. Publication 503, Child and Dependent Care Expenses.
  • Child Tax Credit - This credit is given to the taxpayer for each dependent child who is under the age of 17 at the end of the tax year. A maximum of up to $1,000 can be claimed for each qualifying child; the credit can, however, be limited by the taxpayer's adjusted gross income (AGI). Publication 972, Child Tax Credit.
  • Credit for the Elderly and Disabled - This tax credit is available to citizens and resident aliens who were age 65 or older at the end of the tax year; or were under the age of 65 and retired on permanent and total disability, received taxable disability income, and had not yet reached mandatory retirement age at the beginning of the tax year. Eligibility is also based on the individual's income. Publication 524, Credit for the Elderly or the Disabled.
  • Earned Income Tax Credit - The EIC is a refundable credit for low-income working individuals and families. (A refundable credit is one which isn't limited by the amount of tax that's owed. In other words, even if no tax at all were owed, the filer(s) would still receive the tax credit as a refund.) The amount of this credit is dependent upon the taxpayer's income and family size. Publication 596, Earned Income Credit.
  • Education Credits - There are two credits available for tuition and related higher education expenses, the Hope Credit and the Lifetime Learning Credit. The Hope Credit can be utilized for the first two years of post-secondary education of an eligible student whom the taxpayer claims as an exemption. The education must also be in the pursuit of an accredited degree. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. Both credits cannot be claimed for the same student during the same tax year. Publication 970, Tax Benefits for Education.
  • Retirement Savings Contribution Credit - This credit may be taken based on a percentage of the taxpayer's qualified retirement savings contributions. To be eligible, the individual must be at least 18 years of age at the end of the tax year and not enrolled as a full-time student, and cannot be claimed as an exemption on someone else's tax return. AGI limits may also affect the taxpayer's eligibility. Chapter 5 of Publication 590, Individual Retirement Arrangements (IRAs).

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