Important Tax Credits to Know

There are several significant tax credits that are worth knowing. If you claim a tax credit, the amount of your tax liability is reduced dollar-for-dollar. If your credits are larger than the amount of taxes you owe, you may even be given a refund. Here are some of the most frequently claimed tax credits:

The Earned Income Tax Credit
This credit may be available you if you work and have income from wages, self-employment, or farming. The amount of the credit depends on your income, age, and number of qualifying children.

The Child and Dependent Care Credit
If you have a qualifying child under 13 years of age or a disabled spouse or dependent, you may be able to claim this credit. It pays for expenses paid for taking care of those qualifying children or dependents so that you may be able to work or seek employment.

The Child Tax Credit
You can claim $1,000 for each qualifying child under 17 years of age. To qualify, the child must meet six criteria regarding residence, support, age, relationship, dependence, and citizenship. This can be claimed along with the Child and Dependent Care Credit.

The Health Coverage Tax Credit
This credit allows you to receive up to 80% of health insurance premiums if you are a Pension Benefit Guaranty Corporation payee or Trade Adjustment Assistance recipient.

The Retirement Savings Contributions Credit
If your income is below a particular amount (depending on your filing status) and you contribute to an IRA or 401(k) plan, you may be able to claim this credit, which aims to help lower and moderate income workers save for retirement.

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