Managing your taxes can be daunting, but it’s also a time to assess whether you’re owed money from the IRS. Beyond the standard deductions, other tax credits are available to reduce your tax bill. Here are 12 tax credits you could be missing out on:
Earned Income Tax Credit (EITC)
Earned income tax is a refundable credit available to low-income workers and families. The amount you receive depends on how much you earn, your filing status, and the number of children you have. An EITC Assistant tool on the IRS website allows you to see if you can make a claim or speak to a specialist accountant for professional advice.
Child Tax Credit
Child Tax Credit helps parents with the costs of raising children for those with a qualifying child under 17. The total credit is currently $2,000, with older dependents sometimes qualifying for a partial credit. The amount of credit will vary from year to year, so you must check the government tax website for the most up-to-date credits. While you may think the amount of credit is negligible, it can reduce your tax liability and may increase your tax refund.
Dependent Care Credit
If you are responsible for children under 13 or provide care for dependent adults, you may be eligible for dependent care. The credit percentage and maximum amount vary depending on your income and can be used on daycare, a nanny, or another qualified caregiver.
Adoption Credit
The Adoption Tax Credit (ATC) is a tax credit offered by the US government to help ease the financial impacts of adopting a child. This credit can be a significant benefit for families who want to adopt a child but are unsure if they can cope financially. This credit can finance some of the adoption expenses, including adoption fees, court costs, travel expenses, and buying the things you need to welcome your child into your home.
Education Credits
The cost of college can significantly burden students and their families. The American Opportunity Tax Credit and Lifetime Learning Credit (AOTC) can help reduce your tax bill if you’re paying for college tuition. It may also cover any additional fees, accommodation, and books. To qualify, you or your dependent must be enrolled at least part-time for the academic year at an eligible educational institution.
Retirement Savings Credit
Planning for retirement can be overwhelming, especially if you are on a low income and cannot put a lot of money into savings accounts. However, the government offers the Retirement Savings Credit (RSC), also known as the Saver’s Credit, to incentivize low- and moderate-income earners to save for their future. The credit amount is based on your income and contributions to a qualified retirement plan such as an IRA.
Health Coverage Tax Credit
Many people worry about the cost of healthcare and try to secure affordable coverage. If you purchase coverage through a Marketplace plan under the Affordable Care Act, you may be eligible for a Health Tax Credit that will help with the cost of health insurance premiums.
Residential Energy Credits
The government offers several energy credits to support homeowners to make energy-efficient improvements. These credits can help you save money on the upfront costs of home insulation, new windows, and solar panel installation. The initial credit can also become long-term financial gain as you will reduce energy through your changes.
Home Buyers Credit
While not currently available, this credit has been available in the past to help first-time homebuyers reduce their tax burden. If you plan to buy a new home, it is worth checking government websites or asking your local real estate agent if they have any available credits.
Charitable Donation Credit
Donating to qualified charitable organizations is a generous act that can benefit the cause you support and your finances. The IRS offers a Charitable Donation Credit to incentivize charitable giving, allowing you to deduct a portion of your contributions from your taxable income.
Volunteer Credit
While there is currently no federal tax credit specifically for volunteering hours, a limited volunteer credit is available for seniors under certain conditions. You qualify if you’re 65 or older and meet income limitations when volunteering time with qualified organizations.
Harvi Sadhra is the CEO of Revir Media. He has over 10 years of experience in digital media and has been featured in many of the largest media brands on topics related to finance, stocks, money, technology, and more.