Are you interested on what some of the benefits and tax credits you may qualify for are ? We have a few tools and tips for taxes to give you a better understanding your return.
Personal & Dependent Exemption
Most common tax deductions is the dependent exemption — $3,950 for each child until your child turns 19, or 24 if he’s a full time student. With two qualifying children, you can deduct $3,950 for each exemption you claim on your tax return — that’s a total of $11,850 by which you may be able to reduce your taxable income.
Filing Taxes as a "Head of the Household"
Filing as “Head of Household” has two benefits. First, you’ll pay less taxes overall; and second, you’ll also be able to claim a significantly larger tax exemption.
Earned Income Tax Credit
EITC, the Earned Income Tax Credit is a tax benefit designed primarily to help low- to moderate-income individuals and families whose earned income falls below a certain limit. It isn’t a welfare handout per se. Only people who work and pay taxes can claim it; creating an incentive for them, including many who are poor, to leave welfare for work.The EITC is “refundable,” which means that when EITC exceeds the amount of taxes owed, it results in a tax refund, whose amount varies by income, family size and filing status.
Child Tax Credit
If your child or children under the age of 17 (on the last day of the year), claimed as dependents and are US citizens, then you can qualify for Child Tax Credit.
This can reduce your taxes by up to $1,000 for each qualifying child. The child tax credit will be gradually reduced based on your income for the year until it reaches a threshold of $75,000 (by $50 for each $1,000 of income above that threshold amount).
Technically speaking, as your income increases, the exemption decreases proportionately. For some, utilizing the child tax credit can reduce their tax liability to zero.
Additional Child Tax Credit
The Additional Child Tax Credit is a refundable tax credit for people who have a qualifying child and did not receive the full amount of the Child Tax Credit.
Unlike the EITC, the Additional CTC is partially refundable. Families whose credit exceeds their tax liability can receive the remainder of the credit in the form of a refund not exceeding 15% of their earnings above $3,000.
Child and Dependent Care Credit
Paid a local daycare center to take care of your kid? Did you pay someone to care for your child so that you could work or look for work?
If you did, you may claim up to $3,000 of expenses paid in a year for one qualifying child under 13 or $6,000 max per family. Eligible expenses include the cost of a nanny, preschool, before- or after-school care and summer day camp.
This works best when you file as a “Head of Household”, and can cut your taxes by up to 35% of what you’ve paid for the service — the exact percentage is determined by your income level. Keep in mind that the dependent care credit is not refundable, meaning it can only take your tax bill to zero. Any excess credit is not usable
Education Tax Benefits
There are two (2) tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American Opportunity Credit and the Lifetime Learning Credit.
The former is a tax credit of up to $2,500 of the cost of tuition, fees and course materials, which can be claimed for expenses for the first four (4) years of post-secondary education.There is, however, no limit on the number of years for which you can claim a Lifetime Learning Credit based on the same expenses. the Lifetime Learning Credit is non-refundable so the maximum credit is limited to the amount of tax you owe.
Review your W-4: Bigger Refund or Bigger Paycheck?
The more allowances you claim on the form, the less income tax will be held back.
Claiming allowances for yourself, your spouse and your qualifying children and dependents
Taking an allowance for filing head of household
Claiming more than $1,500 for child and dependent care expenses
Working more than one job
Having a spouse who works
Married Filing Jointly, Married Filing Separately, Single, and Head Of Household
Earn Income Credit
Working families, individuals, people who are self-employed and others who have a moderate to low income may qualify for the earned income tax credit.
Dependent Care Credit
Based on a percentage of the amount you paid for the care of a qualifying child or dependent. The total expenses you can claim are capped at $3,000 for one eligible individual and $6,000 for two or more.