An IRS Tax Credit is a financial incentive given by the Internal Revenue Service (IRS) that can reduce the amount of taxes you owe. In most cases, tax credits are awarded based on income, family size, or other factors. The amount of the credit will vary based on the criteria used. While there are numerous types of tax credits, the most common ones are the Earned Income Tax Credit (EITC), the Child Tax Credit, and the Education Tax Credits.
What is the Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) is a refundable tax credit that was created to help low- to moderate-income individuals and families. The amount of the credit is based on the number of qualifying children and the amount of earned income for the year. The maximum EITC for 2019 is $6,557 for those with three or more qualifying children. If you have no qualifying children, the maximum credit is $529.
What is the Child Tax Credit?
The Child Tax Credit is a credit of up to $2,000 per qualifying child. The credit is available for children who are under the age of 17 at the end of the tax year. To qualify for the Child Tax Credit, the taxpayer must have at least one qualifying child, must have earned income for the year, and must not have a modified adjusted gross income (MAGI) that is over the threshold amount. The maximum credit is $2,000 per qualifying child. In addition, a taxpayer could be eligible for the Additional Child Tax Credit, which is a refundable credit of up to $1,400 per qualifying child.
What are Education Tax Credits?
Education tax credits are credits available to taxpayers who are paying for higher education expenses. The two most common education credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The AOTC is a credit of up to $2,500 per eligible student. The LLC is a credit of up to $2,000 per tax return. To qualify for either of these credits, the taxpayer must have qualified education expenses for the year and must not have a modified adjusted gross income that is over the threshold amount.
How Do I Claim an IRS Tax Credit?
If you think you may qualify for any of the IRS tax credits, you will need to complete the appropriate forms. For the EITC and the Child Tax Credit, you will need to complete Form 1040, Schedule 8812. For the AOTC and LLC, you will need to complete Form 8863. You will also need to provide proof of your income, qualify expenses, and other necessary information. Once you have completed the forms and gathered all of the necessary documentation, you will need to submit the forms to the IRS.
Can I Claim an IRS Tax Credit if I Don’t Owe Taxes?
Yes, you can still claim an IRS tax credit even if you don’t owe any taxes. If the credit is more than the amount of taxes you owe, you will receive a refund for the difference. This means that even if you don’t owe any taxes, you can still benefit from the credits by receiving a refund.
Are There Any Other Tax Credits I Should Be Aware Of?
Yes, there are several other tax credits available. Some of these include the Savers Credit, the Adoption Credit, the Credit for the Elderly or Disabled, and the Renewable Energy Credits. Each of these credits has specific eligibility requirements, so it’s important to research them to see if you are eligible. Additionally, some states offer their own tax credits, so it’s a good idea to check with your state’s tax department to see what credits are available.
IRS Tax Credits can be a great way to reduce your tax bill or even get a refund. It’s important to understand the various credits available and the eligibility requirements for each one. Additionally, you should be aware of the other tax credits that may be available to you. If you think you may be eligible for any of these credits, make sure to research them and complete the necessary forms to claim them.