When you are getting ready for tax filing, you need every vital aspect of it. One of the essential elements of it is a tax credit. There are so many, as a filer, you might get confused. You can save a lot of money with a tax credit. With Tax cuts and jobs act, things have changed. So, here we wanted to tell you about some of the essential tax credits. So, here we present them to you. In case you need to calculate your taxes, you can use a tax calculator. Now, let’s see what the Tax Credits are.
Earned Income Tax Credits
Introduced in 1975, it is the most critical tax credit and also very common among the taxpayers. The EITC decided by how much your income is. Insignificant cases, it is for those earned who generally have low from moderate income. There is a standard set by the IRS, which, if you meet, then the taxes will reduce. In some cases, there is a tax refund 2020 as well. The filings status matters too.
The first thing is age. You should be at least 25 years to qualify and less than 65 years. If you married, then you and your spouse should live in the country for at least six months, and both should have valid social security numbers. But, if you are a dependent, you do not qualify. If your filing status is “Married filing,” then you won’t be able to qualify.
There is one another misconception. People conceive the idea; if they are self-employed, they are not eligible for EITC. Yet, this is not the case. If you are a self-learning person, you should ask a tax expert if you will qualified for EITC or not. There is a chance; you might qualify.
American Opportunity Tax Credit
If someone in your family is opting for higher education and is not able to pay the fee, then you should take the help of American opportunity tax credit (AOTC). Earlier it is known as Hope credit, but from 2009 it changed to AOTC. It is credit that will pay the fee for the first four years of higher education. The largest annual credit you can get is $2500.Now, to know if you are eligible or not for it, you need to fill form 1098-T. You will get it from the school for which you need to pay the fee. Fill the form, and they attach it to the way 1040 along with form 8863
Who can qualify for it Tax Credits?
Now, comes the question, you can get quality for AOTC. So, here are some of the conditions.
> There should not be a case of drug felony conviction.
> If you have already used it for earlier four years of education, you don’t qualify again.
>If you enrolled in other studies, then you won’t qualify
These are only some of the conditions. To read about all of them, visit the official website of the IRS.
Lifetime Learning Tax Credits
For those who want to avail credit after the four years of education, then they can opt for lifetime learning credit. It is available for professional degree courses, graduate and undergraduate. It also includes learning job skills, as well. The maximum amount is $2000 for claiming with no limit on the number of years to claim the credit.
There are specific rules regarding who is eligible for it. Here are the norms.
> The institution should be eligible
> The degree or job improvement skills should be recognized
There are more norms available on the official Website of the IRS to reach.
Child and Dependent Care Credit
Now, for those who have a child. For them, there is a child and dependent care credit. It is for those people who have to take care of a child under the age of 13. If you have someone who cannot take care of themselves, then you are eligible for claiming the credit. Your filing should mention when you want to fill the form. Depending on what your income is, you will be able to claim 35 percent of qualifying expenses.
Savers Tax Credit
The saver’s tax credit also known as the retirement savings contributions. You can contribute to retirement plans such as in qualified investment retirement accounts 401(k). There are also other retirement plans to check out as well. You can get up to $1000 for credit if you are single. $2000 if you are filing jointly. If you have a low income, then you should go for it.
So, some of the essential credits we wanted to discuss. If you find it too complicated to calculate the credits, you can use a tax calculator.