Here is an article we found to be informative on all the new updated tax credits coming up. If you have any questions about how we can help you with these tax credits give us a call right away!
Are you looking to save money on your taxes? To maximize your tax savings, check your eligibility for tax credits. Tax credits directly reduce your tax bill, while deductions reduce your taxable income and therefore save money in proportion to your tax rate.
Refundable credits are even more valuable, since you can receive the credit even if it’s beyond the amount of taxes that you owe. Non-refundable credits are good only up to the total limit of taxes that you owe.
Look over these seven popular tax credits and see if they are likely to apply to you, either in filing this year’s or next year’s taxes.
1. Earned income tax credit (EITC)
The EITC has helped many low-income families over the years. Not only is it a refundable tax credit, it is also the only credit that can be claimed when using Form 1040EZ. To claim the EITC, you must be a U.S. citizen (or resident alien) with some earned income, a Social Security number, and investment income of less than $3,450 for the year. You can’t claim the EITC under married filing separately status.
For tax year 2017 (the taxes you will file in April 2018), EITC income limits with no qualifying children are $15,010 for single filers and $20,600 for couples filing jointly. The income limits scale with the number of qualifying children until reaching $48,340 singles/$53,930 couples at three qualifying children. Credits range from $510 with no qualifying children to $6,318 with three or more qualifying children. Income limits and credits will rise slightly for tax year 2018.
2. Child tax credit
A basic non-refundable child tax credit of up to $1,000 per child is available this tax season if your child meets the criteria in seven respects — age, relationship, support provided, dependency (claimed on your tax return), citizenship, residence time in your home for the year, and family income. The recent Tax Cuts and Jobs Act doubled the child tax credit to $2,000 through 2025 to partially offset the loss of personal exemptions. This change will be applicable to your 2018 taxes filed in April 2019.
Income phaseouts were also greatly increased through 2025 by the new tax law. They begin at a modified adjusted gross income (MAGI) of $200,000 for single filers (up from $75,000 for this tax year) and $400,000 for married filing jointly (up from $110,000).
If you don’t owe enough in taxes to claim your full Child Tax Credit, you may qualify for the refundable Additional Child Tax Credit that allows you to claim the difference up to $1,000 ($1,400 from tax year 2018 through 2025). Use IRS Form 8812 to see if you qualify.
3. Non-child dependent credit
A new $500 non-refundable credit covers dependents who don’t qualify for the child tax credit, such as children who are age 17 and above or dependents with other relationships (such as elderly parents). You can’t claim the credit for yourself (or your spouse under married filing jointly status). This credit comes into play from 2018 taxes filed in 2019 and expires after 2025.
4. Child and dependent care tax credit
The above two tax credits relate to the existence of children or dependents, while this credit relates to child-care expenses incurred so you can work or look for work. You can claim up to $3,000 in expenses for a single qualifying child/dependent and $6,000 for two or more, and the credit will cover between 20 percent and 35 percent of your allowable care expenses based on income. There is no phaseout limit.
5. Education credits
The tuition and fees deduction was eliminated in the recent tax bill, but tax credits provide another path for savings for tuition and enrollment fees at qualified institutions.
The Lifetime Learning Credit covers up to $2,000 per year as long as your MAGI is $65,000 or less for single filers and $130,000 or less for married filing jointly. The American Opportunity Tax Credit (AOTC) allows you to claim up to $2,500 per eligible student per year for up to four years as long as your MAGI is under $90,000 for single filers or $180,000 for married filing jointly. Up to 40 percent of the AOTC is refundable.
You can only claim one of the education credits for each student.
6. Retirement savings contribution credits
Also known as the Saver’s Credit, this tax credit allows a tax reduction for up to 50 percent of your contributions to an IRA or an employee-sponsored retirement plan such as a 401(k). The 50 percent credit applies up to an AGI of $18,500 for single filers and $37,000 for married filing jointly in April 2018. The credit falls to 20 percent and 10 percent of contributions at sliding AGI levels before disappearing entirely at $31,000 single/$62,000 married filing jointly.
7. Health-care premium tax credit (PTC)
Despite the claims, ObamaCare is not dead just yet. The penalty for failing to purchase health-care insurance (the individual mandate) will be gone from 2019 onwards, but the PTC still exists to make health insurance more affordable for those purchasing through the marketplace.
You may qualify for this refundable credit if your household income is less than 400 percent of the federal poverty line (FPL) for your family size. For 2017 taxes, the FPL is $11,880 for an individual and $4,140 each for additional household members.
A list of individual tax credits may be found at the IRS website — but double-check with your tax preparer for any changes or updates from the tax bill that aren’t reflected in this list.
Check your eligibility for any of these money-saving credits. As painful as it may be, you should also keep an eye on Congress for any last-minute changes to tax credits, especially those related to health care. Since 2018 is an election year, anything is possible — either positive or negative.
This article was provided by at MoneyTips & http://theweek.com/articles/750574/7-tax-credits-that-could-save-money-2018