The next federal income tax filing cycle is just around the corner, and we wish you are aware of all the ways to reduce your tax liabilities. The IRS permits several tax credits using which you can reduce your tax liabilities and earn a tax break. You still have enough time to understand these credits and figure out your eligibility. Let us take a look at some of such tax credits and what they are all about.
Earned Income Tax Credit (EITC)
You can avail the Earned Income Tax Credit if your income comes in the low to moderate-income cap and meets some prerequisite eligibility requirements. The tax credit is a refundable one and hence allows you to pay less federal income tax, no tax, or even receive a tax refund.
If your have a working family with three or more qualifying children, then the credit might be as high as $6,557. And in case you don’t have any qualifying children, then the credit can be as high as $529.
For you to receive an Earned Income Tax Credit, you should have an income, and must file a tax return no matter if you owe any taxes or not, or are required to file or not. If you are someone who doesn’t owe any tax or isn’t required to, based on your income bracket to file for one, then filing the federal income tax return would allow you to receive a refund and earn some extra dollars.
To understand your eligibility and check if your children qualify as per the requirement of the credit, you can use the EITC Assistant available on the IRS website or get in touch with your MyTaxFiler expert to make the best of your tax returns and credits.
Child Tax Credit
You would be eligible to avail the Child Tax Credit if you have qualifying children under the age of 17 years, and if they meet specific prescribed qualifications. The maximum amount of Child Tax Credit that you may earn per child is $2000, out of which $1400 is refundable.
This feature makes the Child Tax Credit just like the Earned Income Tax Credit, which allows you to receive a refund even if you don’t owe any taxes or are required to file for a return.
For availing this type of tax credit, your children must have a Social Security Number issued before the last tax filing date of that tax cycle.
So, for availing this credit for the 2019 tax cycle, your child would be required to get a Social Security Number issued before 15th April 2020 or before 15th October 2020, if you get an extension for filing your returns.
Credits for Other Dependents
You can avail the Tax Credit for Dependents if you do not qualify for Child Tax Credit. For availing the credit for other dependents, your dependent children must be 17 years of age or older before the end of 2019.
One of the features of this type of tax credit is that it can also be claimed for your dependent parents or other individuals supported by you as your dependent.
There are two types of Education Credits which you can avail to support the cost of your higher education or that of your spouse or children or other dependents. The two types of credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
You can avail these tax credits by filling and attaching Form 8863 with your federal income tax return. Out of the two, the American Opportunity Tax Credit is partly refundable.
To be eligible to receive any of these two education credits, you would need to receive Form 1098-T (Tuition Statement) from your or your spouse’s or dependent’s school. There are a few exceptions to this case, though, which should be explored further.
There are several tax credits that you may avail to get a tax concession. The crux is that you should be aware of the types and qualifying conditions of these tax credits. You can use the IRS’s Interactive Tax Assistant to explore all such tax credits and understand their USPs and the terms and conditions of eligibility. There is still time to understand all your options of saving more taxes and taking prompt actions to become eligible before the 2019 tax filing deadline closes-in. Feel free to contact your MyTaxFiler experts to understand your tax portfolio and have a flawless tax filing experience.