Tax Tips

INDIVIDUAL TAX SAVING CREDITS

• Child Tax Credit: A refundable credit for each qualifying dependent, subject to partial phase out for higher incomes.  Maximum credit of $3,600 for each qualifying child under age 6. $3,000 for each child ages 6 – 17, and $500 for other dependents. If you have received Advance Credit Payments, your allowable credit must be reduced (but not below 0) by the total advance payments. The IRS will send a letter detailing these payments in late January.

• Child Care Credit: The Child Care Credit is given to a taxpayer who incurs child or dependent care expenses which enable the taxpayer to work. This non-refundable credit is up to $8,000 for two or more dependents.

• Foreign Tax Credit: The Foreign Tax Credit reduces US taxes by the amount of foreign taxes paid. This credit is non-refundable.

• Education Credits: The American Opportunity Credit (AOC) is for qualified education expenses paid for the taxpayer, the taxpayer’s spouse, and for dependents; up to $2,500 per child. The Lifetime Learning Credit (LLC) is equal to 20% of qualified education expenses paid for the taxpayer, the taxpayer’s spouse, and for dependents; up to $2,000 per year.  Both of these credits are non-refundable and are subject to phase out for higher income taxpayers.

• Earned Income Credit: Certain taxpayers whose income falls within specific limits can be eligible for the Earned Income Credit. This credit is fully refundable and can exceed $6,700 for taxpayers with three or more children. A reduced credit is also available for taxpayers without qualifying children.

• Retirement Saver’s Credit: The Retirement Saver’s Credit encourages retirement savings by allowing a credit based upon a percentage of amounts contributed to an IRA or retirement plan. This credit is non-refundable, but can be for an amount as high as $2,000.