Knowing the tax credits that apply to you and your tax return could mean saving hundreds, even thousands, of dollars. We’ve broken down the most common tax credits, with the general requirements for each of them, so you can see which apply to you and take the necessary steps to claim them on your tax return.
Earned Income Tax Credits
The Earned Income Tax Credit (EITC) was established in 1975 to help offset the cost of Social Security taxes for those with low-to-moderate-income.
Eligibility for EITC and the amount given is calculated by gross income, earned income, investment income, and then your filing status, which is either single, married filing jointly, or with children. Those that are married but filing separately do not qualify. To qualify, you must earn less than $53,505 for married couples or $47,955 for individuals, if you have three or more children. If you have no children, the allowable income is $20,600 for married couples and $15,010 for individuals. If you’re self-employed, you may also qualify for the EITC, it just depends on the amount you earn.
You must be between 25 – 65 years old to qualify for EITC and if you’re married, both of you must have a valid Social Security number and have lived in the USA for more than six months.
Learn more about whether you qualify for EITC and your options with this video
Homeowner Credits
There are several tax deductions that homeowners can take advantage of:
Mortgage interest
The monthly interest you pay on your mortgage is tax deductible, for both primary and secondary residences. The total interest you paid is on Form 1098, which you can use when you fill out Schedule A for your itemized deductions.
Property taxes
Annual real estate taxes are tax deductible. You’ll find the total of the taxed you’ve paid on your mortgage interest statement. You can also deduct real estate taxes paid at settlement if you purchased your home in this tax year.
Points
Any points paid when you took out your mortgage are tax deductible. As points are pre-paid interest, you will be able to deduct a portion of them each year over the span of your mortgage loan.
Renewable-energy tax credits
If you installed energy efficient windows, storm doors, efficient air conditioning and heating systems or insulation before December 31, 2016, you may be eligible for the Energy Efficiency Property Credit.
Alternatively, installing renewable energy sources like solar panels, wind turbines, fuel cells or geothermal heating systems could make you eligible for the Renewable Energy Efficiency Property Credit. If you do, you can get up to 30% of the equipment and installation cost back.
Elderly Homeowner/Renter Credit
If you’re a Montana resident who is 62 or older and your total household income is less than $45,000, you may qualify for this program and receive up to a $1,000 refundable tax credit – even if you don’t have to file and income tax return. In fact, if you’re just learning about this credit, you may be able to claim refunds for previous years.
Child and Dependent Care Credit
If you’re a working parent paying for childcare for dependents under the age of 13, the Child and Dependent Care Credit can help to offset the costs. This credit also works for costs associated with caring for a spouse or dependent (of any age) who is mentally or physically unable to care for themselves.
Depending on your gross income, this credit provides up to 35% of qualifying expenses. To file for this credit, your filing status must be either single, married filing jointly, head of household, or qualifying widow or widower with a dependent child.
Saver’s Tax Credit
If you invest in a 401k or another eligible retirement plan, you could be entitled to the Saver’s Tax Credit.
To file, you must be at least 18 years old and not a full-time student or a dependent on another person’s tax return. Taxpayers with the least income qualify for the greatest credit, which is up to $1,000 for those filing as single or $2,000 if filing jointly. The maximum income for single filers is $30,750 and $46,125 for heads of household. For those who are married and filing jointly, the maximum income is $61,500.
American Opportunity Tax Credit
The American Opportunity Tax Credit helps families pay the costs of higher education, covering four years of post-secondary education for students that are enrolled at least half-time for at least one academic period.
Depending on your income, you can receive up to $2,500 for the cost of tuition, course materials paid for during the tax year. If your income as a single person is no more than $80,000 or $160,000 if you’re a married couple filing jointly, full credit is available to you. However, you will need to see if including tuition and materials costs as one of your itemized deductions will be more beneficial to you, as the IRS will not accept both the American Opportunity Tax Credit and college-related deductions in the same tax year. Any tax software that you use will automatically compare the two.
Lifetime Learning Credit
For those with a lower income limit, there is the Lifetime Learning Credit, which also helps to offset the costs of post-secondary education. This credit differs from the American Opportunity Tax Credit in that you can use it for any years of post-secondary education, not just the first four. This credit is also available if you’re not pursuing a degree. If you make less than $55,000 as a single individual or $110,000 as a married couple filing jointly, you could be eligible for full credit, which may be as high as $2,000 per student.