Westchester tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions!
The Earned Income Tax Credit (EITC) is for working individuals who do not earn high incomes. Taxpayers who qualify and claim the credit could pay less or no federal tax, or even get a tax refund. However, the IRS estimates that 25% of those who qualify don’t claim the credit and advises taxpayers to consider claiming tax credits i.e., a dollar-for-dollar reduction of taxes owed for which they might be eligible.
Some of the credits taxpayers could be eligible to claim include:
Earned Income Tax Credit (EITC): A refundable credit for low-income working individuals and families. Income and family size determine the EITC amount. If the EITC exceeds the amount of taxes owed, those who claim and qualify for the credit receive a tax refund. See IRS Publication 596, Earned Income Credit (EIC) or use the EITC Assistant to see if you qualify.
Child Tax Credit: For people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child and it can be claimed in addition to the credit for child and dependent care expenses. See Pub. 972, Child Tax Credit.
Child and Dependent Care Credit: For expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. The amount of qualifying expenses is limited and the credit is a percentage of those expenses. See Pub. 503, Child and Dependent Care Expenses.
Adoption Credit: A tax credit of up to $13,170 can be taken for qualifying expenses paid to adopt an eligible child. See Pub. 968, Tax Benefits for Adoption.
Credit for the Elderly and Disabled: Available to individuals who are either age 65+ or under age 65 and retired on permanent and total disability, and who are citizens or residents. Income limitations apply. See Pub. 524, Credit for the Elderly or the Disabled.
Education Credits (Two Available): For those who pay higher education costs. The American Opportunity Credit (formerly the Hope Credit) is for the payment of the first two years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption on a tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. See Publication 970, Tax Benefits for Education.
Retirement Savings Contribution Credit: A credit for a percentage of qualified retirement savings contributions, such as contributions to a traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount. See chapter four in Publication 590, Individual Retirement Arrangements (IRAs).
In addition to those listed here, other credits are available to eligible taxpayers. Please contact Westchester CPA Paul Herman so we may asses your specific situation, and offer advice on the best way to claim your credits.