Nobody likes paying taxes. Therefore, below we tell you about five tax credits that will help you when you have to file your taxes in the United States. In some cases, instead of having to pay taxes, you will receive a check from the Internal Revenue Service (IRS).
Tax credits are a direct discount on the amount of federal tax you must pay in the US. That is, if the credit is $3,000 and you owe $5,000 in taxes, you will only have to pay $2,000.
In some cases, the credit is refundable. This means that if the credit is more than the amount you owe in taxes, the government must pay you. So, if you owe $1,000 in taxes but have a refundable credit of $5,000, the government will send you a check for $4,000.
Before we tell you about the credits, we clarify that the income that is counted to see if you qualify for the credit is your adjusted gross income.
Tax credit for working
It sounds too true to be proper, but it’s now not. The government can pay you to work. The idea of the earned income tax credit (EITC) is to help individuals and families who work but have low incomes.
The income requirements to be eligible for this credit vary depending on the person’s marital status and the number of children they have. For example, a single person without children qualifies for the credit if she earns less than $15,980 a year. Instead, a married couple with three children filing jointly qualifies if their income is less than $57,414.
This credit ranges from $543 for those who have no children to $6,728 for those who have three or more children.
Accessing this tax credit requires a valid Social Security number.
Tax credits for having children
Having children brings many expenses, but federal law provides some help to lighten the financial burden of having children.
- Credit for children. The child tax credit is $3,600 for each qualifying child under age 6. It is $3000 for each child between 6 and 17 years old. In 2021, this credit will be given through monthly payments to the bank account that began on July 15.
- Credit for care expenses for minor children. There is a credit of up to $3,000 per tax year for parents who pay for child care while working.
- Credit for adoption expenses. There is a credit of up to $14,300 for those with adoption expenses. This credit is non-refundable.
Tax credit for expenses on income and property taxes
Some states want to help with housing costs. To do this, they have credits available for renters and homeowners who meet income eligibility requirements.
For example, California has a credit of up to $60 for single people earning less than $42,932 and up to $120 for married couples earning less than $85,864.
Tax credits for education expenses.
There are two credits for deducting education expenses from your taxes.
American Opportunity Tax Credit (AOTC). This refundable credit allows you to recover up to $2,500 for education expenses. It applies to single people with incomes up to $90,000. It applies to married people with incomes up to $180,000. Can only be used for four years.
Perpetual Learning Credit. This credit, which is non-refundable, allows you to recover up to $2,000 for education expenses. It applies to single people with an income of up to $69,000. It applies to married people with an income up to $138,000.
Those credits cannot be used at the same time.
Tax credit for purchasing an electric car.
For those purchasing new electric cars, there is a tax credit ranging from $2,500 to $7,500. New electric motorcycles also qualify. This credit is non-refundable.
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- Taxes on income earned abroad.
Talk to a qualified federal tax credit attorney today
This article is meant to be helpful and informative, but criminal topics may be complicated and disturbing. A qualified federal tax credit attorney can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a qualified federal tax credit attorney near you to discuss your particular legal situation.