Federal Tax Credits for Family, Home, Work, and School
There are many tax credits that will help reduce your tax burden. Take the time to learn more about these tax credits now and you may save hundreds, even thousands, on this year’s tax return. View list of current tax deductions.
Family Tax Credits
The Earned Income Tax Credit (EITC) is a credit for taxpayers who earn low to moderate incomes. EITC can reduce your taxes, and can mean a refund. Meaning more working families and individuals may keep more of what they work for.
The child tax credit allows you to take a deduction against your tax liability if you care for one or more qualifying children. The child tax credit is in addition to the credit you receive for child care and dependent child expenses. This tax credit is meant to provide additional alleviation of the tax burden to parents with qualifying children. However, there are many tests and limitations on the credit.
Child and dependent care can be very expensive. However, there are certain cases where you may claim a deduction on family-related expenses if you are in the process of looking for a job. Depending on the particulars of the situation, you may reduce your tax by claiming the child and dependent care credit on your federal income tax return for any expenses related to payments made to someone to care for a child under the age 13, a qualifying spouse, or a dependent.
You may be eligible for a hybrid vehicle tax credit if you bought a hybrid vehicle in 2009. For the most fuel-efficient models, the credit can be worth up to $3,000. The exact amount of the credit is dependent on the make and model of the vehicle and in what state the vehicle was purchased.
You may be able to take the credit for the elderly or the disabled if you are 65 years of age or older, or if you retired on total and permanent disability and have taxable disability income. To take the credit, however, your income must not exceed certain limits.
The adoption credit is designed to help parents with the expenses involved in adopting a qualified child (including a child with special needs). An eligible child is any child under 18 or a child that lacks the ability to care for him or herself.
The foreign tax credit was implemented to reduce a double tax burden for citizens earning income outside of the United States—once by the United States and again by the foreign country where the income is derived.
Work and Job Related Tax Credits
The Saver's Credit, formerly known as The Retirement Savings Contributions Credit, helps middle-income families to save for retirement. The Saver's Credit may allow you to reduce your income tax dollar-for-dollar by up to $1,000 ($2,000 for married filing jointly). The exact Saver's Credit amount is based on how much you contributed and what percentage of your contributions qualify.
Home Related Tax Credits
If you were a first-time homebuyer in 2009, and you have not owned a home for 3 years, you should be aware of The First Time Homebuyer Tax Credit. It is fully refundable and allows you to reduce your tax liability and increase your tax refund. The new First-Time Homebuyer Tax Credit, unlike the old 2008 credit, is a pure tax credit of up to $8,000 which need not be repaid.
Even if you have owned a home in the last 3 years, you may qualify for a new, slightly smaller tax credit of up to $6,500. To qualify, you must have owned a home for at least 5 consecutive years within the 8 year period prior to purchasing your new home.
If you made energy saving improvements to your home during the year of 2009 you may be eligible for money saving tax credits. You may be able to take up to 30% of the amount paid or incurred in energy efficiency improvements to your main home.
Mortgage Interest Credit
Depending on your situation and where you live, your state or local government may make a mortgage credit available to help pay for both mortgage principal and interest. To learn more about these credits, search your local government and state websites for low income housing program details and low income subsidies.
Education Tax Credit
There are two major tax credits available for both new and continuing students: the Hope Credit (which was recently expanded and is now known as the American Opportunity Credit) and the Lifetime Learning Credit. Each credit offers special advantages to students but both credits may not be claimed by the same student in the same year.
More About Tax Deductions and Tax Credits for which you might qualify