How much do you know about tax credits? Tax credits can help taxpayers retain some of their earnings. Some common tax credits include earned income, childcare, higher education, and more.
Here are 5 tax credits that may be able to help you minimize your tax bill:
1. Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is arguably the most recognized of all federal tax credits. Originally established in 1975, the EITC was created to offset the burden of Social Security and Medicare taxes experienced by working people. It is intended as a benefit for working people with low to moderate income. Eligible taxpayers must be between 25 and 65 years of age to qualify.
Learn more about the EITC and who qualifies at: www.irs.gov/credits-deductions/individuals/earned-income-tax-credit
2. Child and Dependent Care Credit
Another well-known tax credit is the Child and Dependent Care Credit. This is a big one for working families who spend a significant amount of money on childcare. However, the credit is also available to taxpayers caring for spouses or other individuals who are physically or mentally incapable of self-care.
Learn more about the Child and Dependent Care Credit and who qualifies at: www.irs.gov/taxtopics/tc602
3. American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) was first established in 2009 as the Hope Credit. It is a tax credit designed to offset some of the costs of the first four years of higher education. Eligible students can get a maximum annual credit of $2,500.
Learn more about the AOTC and who is an eligible student at: www.irs.gov/credits-deductions/individuals/aotc
4. Lifetime Learning Credit
This tax credit is another one designed to offset the cost of education. Unlike the AOTC, there is no limit on the number of years you can claim the credit. Eligible students can receive a credit of up to $2,000 per year.
Learn more about the LLC and who is eligible at: www.irs.gov/credits-deductions/individuals/llc
5. Saver’s Tax Credit
The Saver’s Tax Credit, also known as the Retirement Savings Contributions Credit, is a credit designed to encourage people to save for retirement through a 401(k), IRA, etc. You may be eligible to receive a tax credit for contributing funds to one of these retirement accounts. The maximum credit is $1,000 ($200 if married filing jointly) per tax year.
Learn more about the Savers Credit, who is eligible and how to claim at: www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit
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