Tax season is officially here, and most taxpayers are eligible for some big savings. To get the most out of your tax return, it is important you know the tax credits available to you to help maximize your tax refund.
If you earn less than $69,000 annually, you can file your taxes for free via the IRS website. However, the IRS is not going to walk you through what tax credits you can use and which ones you cannot. If you are filing your taxes on your own, these tips can help maximize your refund.
Earned Income Tax Credit
One of the biggest tax credits available is the Earned Income Tax Credit (EITC), a credit that was established in 1975 to help working people who earn low to moderate income. It is determined by household income and the amount allowed is based on whether the person is filing single, married jointly, as well as how many qualifying children the filer has. The amount of credit you can claim for each qualifying child depends on whether you are filing jointly or single, as head of the household. To receive the EITC, you must be between the ages of 25 and 65, have a valid Social Security number or be married to someone who has one, have lived in the country for more than six months, and earn at or below a certain income threshold. You cannot claim the EITC if you are married filed separately or if you earned $3,600 or more in 2019 from investment income. If you are self-employed, you may be able to qualify.
Child or Dependent Care Credit
Let’s face it. Childcare is expensive, which is why the IRS offers the Child and Dependent Care Credit to help parents offset the high costs of daycare or babysitting. This credit is available if you pay for childcare for dependents under the age of 13 in order to either work or look for work. To qualify, you must be single, married filing jointly, head of household, or qualifying widow or widower with a qualifying child. The credit can go as high as 35 percent of the qualifying expenses, based on your adjusted gross income (AGI).
American Opportunity Tax Credit
This credit was once referred to as the “Hope Credit,” and was meant to help families pay for the costs of college. However, the credit was rebranded and expanded in coverage as the American Opportunity Tax Credit (AOTC) in 2009. The AOTC covers you for four years of post-secondary education, so long as your modified adjusted gross income is under $80,000 for single filers or $160,000 for married couples filing jointly. You can receive up to $2,500 in tax credit so long as you are a student enrolled at least part-time for one academic period. Keep in mind, however, as your income increases, the credit received may decrease.
Lifetime Learning Credit
The Lifetime Learning Credit is another tax credit meant to offset the costs of college, like the AOTC. Unlike the AOTC, it is not limited solely to the first four years of post-secondary education. The credit is available even if you are not pursuing a degree. The Lifetime Learning Credit can be as high as $2,000 per eligible student. For 2019, the full credit is available if you make $58,000 or less as a single individual or $116,000 or less as a married coupled filing jointly.
Savers Tax Credits
One additional tax credit available is the Savers Tax Credit, which used to be known as the Retirement Savings Contribution Credit. If you have made eligible contributions to your retirement plans during the tax year, you can claim a credit on your return, amounting to $1,000 for single filers and $2,000 for filers who are married filing jointly. You must be at least 18 years old and cannot have a full-time student during the calendar year or have claimed a dependent on another person’s tax return for that year.
If you have any questions about whether any of these tax credits can help you, it is important you contact a tax professional to discuss your options. Other credits may be available to you that you may not realize. The more credits you can claim, the higher your tax refund will be when all is said and done.
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