Many taxpayers glance at the amount they pay in taxes and frown, cursing Uncle Sam for being insensitive. However, aggressive complaints can never help, as the government cannot operate without your taxes. To help you pay your taxes without feeling the “pinch,” the IRS has an array of tax relief options that taxpayers can turn to, one of which being tax credits.
A tax credit is simply a dollar-for-dollar lessening of the actual amount of taxes you owe the IRS. The IRS has made some of the tax credits refundable where eligible taxpayers who claim one of the credits can get the rest as a tax refund regardless of the status of the liability, even if it has been grounded to zero.
You can increase your refund by taking advantage of the following tax credits;
1. The Earned Income Tax Credit: If your earnings from wages, farming or self-employment are less than $49,078, then this is the tax credit for you. If you have been earning more than this amount in the past, but you saw your income come down last year, you might qualify for the very first time. The amount of credit is set based on your age, the number of eligible kids and income, with the maximum set at $5,751. If you don’t have kids, you might still qualify; see the IRS Publication 596-Earned Income Credit.
2. The Child and Dependent Care Credit: Taxpayers who work or search for work but have kids aged below 13, have a disabled spouse or dependent can benefit from this credit. Review Publication 503-Child and Dependent Care Expenses for more information.
3. The Child Tax Credit: This credit has a maximum of $1,000 for every eligible child and can be claimed on top of the Child and Dependent Care Credit. Read IRS Publication 972, Child Tax Credit.
4. The Retirement Savings Contribution Credit: Also known as the Saver’s Credit, it seeks to enable low-to-moderate income earners put away some funds for their retirement. To qualify, your income has to be below a specific limit and you making contributions to an IRA or a workplace retirement plan like a 401 (k). You can get this credit on top of other applicable tax savings. See the IRS Publication 590-Individual Retirement Arrangements (IRAs) for more information.
Depending on your personal circumstances and facts, there is an array of other tax credits that might be applicable to you. Read carefully the instructions contained on tax forms to see if you are eligible. Check out the IRS website for any other additional information on these tax credits. You can also get phone support on 800-TAX-FORM (800-829-3676).