"What can I claim on my taxes?" is a question we hear a lot—especially from tax filers who are disappointed with the status of their return. If you feel like you are paying too much or not getting enough of a refund, it's time to start looking at possible tax deductions.
Whether you expect a refund or are preparing to owe extra, claiming tax credits for which you are eligible will help improve your return. These federal tax incentives consist of various types of tax credits, including family tax credits, tax credits for students, and many more. They're supposed to be used by those who qualify, which means you're effectively turning down free money if you fail to claim your credit(s).
Of course, in order to claim tax rebates on your return, you need to be aware of those credits in the first place. Many people are surprised to learn that they are eligible for certain credits, and are disappointed when they find that those same credits could have been claimed in previous years. So don’t let free money go floating by while you pay too much on your taxes: take the time to learn about tax credits and stake claim to what is rightfully yours.
We're going to run through five of the lesser-known tax credits. It is unlikely that you will be eligible for all of these credits. In fact, you might not be eligible for any of them. But you won’t know unless you check, so take a moment to review the credits listed below and see if any of them apply to your tax situation.
1. Earned Income Tax Credit-
We start our list with one of the most popular tax credits—the Earned Income Tax Credit, also known as the EITC (or just EIC). This credit is meant for low- to moderate-income taxpayers, both individuals and couples. In order to claim the credit, a taxpayer needs to have a taxable income which falls below a specific threshold, based on his or her tax filing status.
For more information about the EIC, please see our KB article here.
2. Saver’s Credit -
The federal government likes to encourage people to save money. Generally speaking, a healthy economy features a large percentage of people who are saving money for the future. To encourage this activity, there are tax advantages to making certain kinds of investments. One of those advantages is known as the Saver’s Credit.
Simply put, you can gain a tax advantage by putting away money for your retirement. Specifically, if you make eligible contributions to your IRA, or to your employer-sponsored retirement plan, you may be able to claim a credit on your return. The value of this credit will depend on the amount of your contribution, as well as your filing status and your annual income.
For more information on the Saver's Credit, please see our KB article here.
3. Child and Dependent Care Credit-
If you have young children, there's a good chance that paying for care is one of your biggest expenses. For some relief from this expense, you will want to check on your eligibility for the child and dependent care credit.
Your eligibility for this credit will depend on a couple of factors. For one thing, the childcare in question must have been used in order to allow you to work or actively look for work.
For more information on the Child and Dependent Care Credit, please see our KB article here.
4. Child Tax Credit -
In addition to paying for childcare, the act of raising a child is just plain expensive! The costs are too many to name, but they can include health insurance, food, diapers, clothes, and much more. In fact, young parents are often overwhelmed by the sheer number of expenses that come along with their new bundles of joy. Again, the tax code attempts to provide some relief for those in this position.
While this credit alone is certainly not going to offset all the money you have spent on your kids throughout the year, it can help.
For more information on this credit, please see our KB article here.
5. Energy Credits -
The final credit on our list is the Residential Energy Credit. To qualify for the credit, you must have made energy savings improvements to your home during the tax year. However, not all improvements qualify for the credit.
The credit will only apply to the costs of qualified solar electric property, solar water heating property, small wind energy property, and geothermal heat pump property (including installation). This credit is nonrefundable and other credits (Elderly and Disabled, Mortgage Interest Credit, etc) must be applied to the return before this credit is calculated. This means if you do not have a tax liability (do not owe any tax), you will not receive a credit on your tax return for this purchase.
For more information on this credit, please see our KB article here.