When it comes to filing tax returns, there are countless tax credits that could help save you money or cost you thousands if you don’t know how to use them. Credits like the earned income credit or the savers’ credit are often forgotten or unheard of. These credits can drastically help single or married taxpayers who have low income save money on their taxes.
The earned income credit is a refundable credit that can vary based on your income and how many qualifying children you have. The saver’s credit can be claimed on a single or married tax return if they are not a dependent on someone else’s return, and their income is below a certain threshold if they contribute to a retirement account (i.e., Traditional/Roth IRA, 401(k), 403(b), SIMPLE, or SEP). The maximum credit amount can change from year to year, so make sure to check the IRS website for the most up-to-date amounts or ask your tax professional.
There are other more well-known credits, like the Child and Dependent Care Credit, which can offset the cost you spend on childcare while you are at work. This credit can be used for children up to the age of 13. Again, like the previously discussed credits, the credit amount varies. Always check to see what the current amounts are for your tax year to get the most up-to-date date information.
On the topic of having dependents, the child tax credit is one of the most well-known credits and is very useful for parents with children under 17. Anyone can claim this credit; however, there are specific income phase-outs when you make over a certain amount.
There are a plethora of credits that can be used for people of all ages and statuses. It is important to discuss with a tax professional to see if you meet the requirements for any tax credits on your return that could save you thousands of dollars on your tax return.