If you had the opportunity to receive a refund from the IRS or pay less tax legally than you thought you had to, would you take the opportunity or just let it pass you by? 9.9 times out of 10, you’d jump at the opportunity, and why wouldn’t you?
Despite there being numerous ways of paying the IRS fewer taxes, and indeed, of claiming back taxes and expenses that you weren’t aware you could, it turns out that every year, countless US citizens across the nation pass up these very opportunities by failing to take advantage of the IRS federal tax credits that they are legally entitled to.
Tax season may still be quite a way away yet, but it’ll soon be here before you know it and the last thing you want is to leave it until the last minute when filing your return, or worse still, to pay more tax than you should. If you are looking to reduce your tax liability, or even potentially enjoy a tax rebate from the taxman himself, familiarizing yourself with the various tax credits out there is highly recommended.
Here’s a look at several different types of IRS federal tax credits and at whether or not you could be eligible.
Child and department care credit
The first IRS federal tax credit we have for you today is the Child and Department Care Credit.
If you have been responsible for paying somebody else to care for a child under the age of 13 in order for you to study at school or go to work to earn a living, there’s a strong possibility that you will be eligible for this particular credit.
With this tax credit, you can claim as much as 35% of your overall childcare expenses, up to a maximum of $1,050 for one dependent or $2,100 for two dependents.
Earned income tax credit
The next example of IRS federal tax credits we’re looking at today is earned income tax credit.
If your income is considered to be, on the whole, in the low or moderate region, this tax credit is likely aimed at you.
If you are eligible, it is certainly worth contacting a professional tax service to help you claim the credit because it is a good one.
Worth up to a maximum of $6,242, with the total amount varying depending on how much income you bring in, along with how many dependents you’re claiming and how you’re filing, this tax credit has proved to be a lifeline for many US citizens over the years.
Even though it is one of the most appealing, according to the IRS, as many as 1 in 5 people who are eligible for this tax credit don’t actually claim it. If paperwork isn’t your thing, or if you simply aren’t sure how to go about making a claim, contact a tax lawyer or tax professional instead and have them do it for you.
Advanced Premium Tax Credit
Third up we have an advanced premium tax credit.
This particular credit was created to help individuals who were below a certain income limit to pay for their health insurance premiums if they purchased health insurance via the HealthCare.gov exchange.
The exact amount claimants will be eligible for will be based upon a sliding scale that factors into the account, overall income levels, along with personal circumstances such as household size, marital status, and so on.
Savers Tax Credit
Formerly known as the Retirement Savings Contributions Credit, Savers Tax Credit is again for individuals on moderate/low incomes who are making contributions to a 401K or another similar eligible retirement plan.
This credit can be worth up to $2,000, although the actual total amount you receive will be calculated and worked out based on a percentage of how much you have contributed, plus it will vary depending on how much you earn. The more you earn, the lower the figure you receive will be.
Child Tax Credit
Now, again, depending on your earnings, marital status, and whether you are filing jointly or not, you may be eligible for Child Tax Credit.
These IRS federal tax credits could qualify you for up to $1,000 per child. It is, however, worth speaking to a tax professional before you claim for this specific credit because out of the many IRS federal tax credits that are available out there, this one does have pretty specific criteria which need meeting.
As an example, the child must be under the age of 17 and be living with you for a specific percentage of the time. You must also have listed them as a dependent on a previous federal tax return and be a relative.
In recent years, as we make the transition over to greener, more sustainable energy, some energy credits have been scaled back somewhat, though there are still plenty available.
These IRS federal tax credits can potentially help you to save money with energy-saving measures such as insulation, eco-friendly AC, installation of windows, and so on.
These energy credits are not as generous as some of the other IRS federal tax credits we’ve looked at today, but they’re still generous enough, giving you up to $500, which is based upon 10% of the overall cost of the energy saving measures you’re having done.
There is, however, a larger credit available for alternative energy-saving equipment for residential properties, for things such as solar water heaters, along with geothermal heat pumps. These will earn the claimant a 30% credit, which is not too bad at all.
Business Tax Credits
Finally, the last IRS federal tax credits that we have for you today are business tax credits.
Business tax credits are basically a certain amount that businesses can deduct from the taxes that they owe to the IRS.
Business tax credits are actually applied against taxes owed, rather than as a reduction that businesses can then use to reduce taxable income.
When a company files its annual tax return, business tax credits can then be applied.
Because these tax credits are utilized in order to offset the amount of money that a business owes to the IRS, the IRS will oversee the application of business tax credits.