TAX TIMES: Eight tax credits to lower your federal tax bill or increase your refund
AS tax season approaches this year, Americans are looking for any opportunity possible to boost their refunds as inflation remains at record high rates.
Tax experts have revealed the potential ways you could reduce your federal tax bill or even get a much larger refund by thousands this year.
Specifically, you should look out for credits that will bring you hundreds if not thousands back in cash.
So now is the time to list your expenses or deductions which may help lower your tax bill.And if you qualify for any tax credits, it can reduce the amount of income tax you owe to federal and state governments.The tax credits you should consider are listed below.
1. EARNED INCOME TAX CREDIT
Low to moderate income employees and families will look at the earned income tax credit (EITC) this year.
The EITC offers a maximum credit of $600 this year if you are an eligible taxpayer with no children.
However, the credit will become greater if you have children.
The maximum amounts are as follows:
One child households: $3,995
Two children households: $6,604
Three plus children households: $7,430
This is a boost from the maximum amount of $6,935 last year.
Go to the IRS to see if you qualify for the credit, and you’ll also be able to see how much you could receiv.
2. SAVER'S CREDIT
Similarly to the EITC, the Saver’s Credit hopes to give a boost to those with low to moderate incomes.
Called the Retirement Savings Contribution Credit officially, the credit will give taxpayers as much as 50 percent of their retirement account contributions.
Starting this year, taxpayers will see this credit end at $36,500 for single filers, which increased by $2,500 from last year.
For married couples filing jointly, there’s a $5,000 boost from last year, up to $73,000.
To claim the maximum tax credit (50 percent of your retirement contribution), taxpayers must make less than $21,750 individually or $43,500 if filing jointlye.
3. CHILD TAX CREDIT
This year, the federal child tax credit will remain at the original $2,000 per qualifying child because the credit is not adjusted for inflation.
A qualifying parent must have a modified adjusted gross income of $200,000 or less if filing as single, head of household or married filing separately.
However, if you are married and filing jointly, that amount increases to $400,000.
If you have a higher income, that credit will be lowered by $50 for each $1,000 of additional income.
4. ADOPTION CREDIT
The adoption credit for 2023 returns will be set at $15,950 per child.
This credit can be obtained after you have finalized your adoption and after you’ve claimed your adopted child as a dependent.
It’s designed to help parents with the expenses related to adopting a child, and you qualify no matter if you adopted a US citizen child or adopted one from another country.
5. CREDIT FOR THE ELDERLY AND DISABLED
This credit applies to taxpayers who are aged 65 or older or are retired on permanent and total disability and received taxable disability income for the tax year.
Additionally, recipients must have an adjusted gross income or the total of nontaxable Social Security pensions annuities or disability income under the specific limits.
These credits range from $3,750 and $7,500.
6. LIFETIME LEARNING CREDIT
The lifetime learning credit goes toward qualified tuition and related expenses for eligible students at educational institutions.
The credit can help you pay for undergraduate, graduate and professional degree courses, and there’s no limit on the number of years you can claim this credit.
To date, it’s worth up to $2,000 per tax return.
7. AMERICAN OPPORTUNITY TAX CREDIT
The American opportunity tax credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.
You can get a maximum annual credit of $2,500 per eligible student.
If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit, up to $1,000, refunded to you.
The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student.
Then, you can get 25 percent of the next $2,000 of qualified education expenses you paid for that student.
8. ENERGY TAX CREDIT
This year, there’s a tax credit coming for those who own electric vehicles.
For new vehicles, you could get $7,500 off if you earn under $150,000 as a single filer or $300,000 if filing jointly.
To qualify, your car must cost less than $55,000 (or $80,000 if it’s a van or pickup truck).