Common Tax Credits: What They Are and How Tax Payers Benefit from Them
Tax credits are items that are often counted as a payment that has already been received on taxes due even though a taxpayer has not officially made a payment to the IRS. There are a lot of tax credits that an individual may be able to claim on their federal or state returns; however, many taxpayers are not even aware that they may be entitled to a tax credit.
One of the most common tax credits that a taxpayer is entitled to receive is a child tax credit. The child tax credit is for working parents who have a child, or children, that they may claim as a dependent. The majority of American parents will qualify for the child tax credit; however, if a parents makes too much money they may no longer be eligible to receive the child tax credit. According to the IRS married individuals who are filing together cannot make over $110,000, married individuals filing separately cannot make over $55,000, and a head of household cannot make more than $75,000 to claim the child tax credit.
The child and dependent care credit is a popular tax credit that many parents are actually unaware of or unfamiliar with. With the high cost of quality child care the child and dependant care credit is a source of relief for many parents. According to the IRS both parents must work and report an income for the child and dependent care credit to be received. It is also required that the child care is being claimed is for a child under the age of thirteen. The child and dependant care credit may also be applicable for any dependants, such as an older child or a spouse. This credit covers those who are physically or mentally unable to care for themselves. Taxpayers should have proper receipts or proof of payment for each time a payment was made to a child care or adult care worker.
The credit for the elderly or disabled is another tax credit that many elderly or disabled individuals may receive. According to the IRS an individual must be over the age of sixty-five or must be under the age of sixty-five and be permanently disabled to receive the credit for the elderly or disabled. Certain restrictions and requirements may apply for individuals who are seeking to receive the credit for the elderly or disabled.
Taxpayers with or without children may also be eligible to receive an education credit. Education credits are designed for individuals who have paid for themselves, their children, or their married partners to receive an education. The amount of credit will depend on a number of factors including tuition costs, admission fees, books, and school supplies.
In addition to the earned income tax credit, child and dependent care credit, education credit, and the credit for the elderly or disabled there are a number of other tax credits that some taxpayers may claim under certain circumstances. Learning about and fully understanding each tax credit may allow a taxpayer to receive additional money that can be used to reduce their amount of taxes owed or even increase the refund that they may be receiving.