No one likes paying taxes. In fact, the name of the game is to keep as much of your hard-earned money as possible. Although taxes are essential, the IRS understands they can be tough on low- and middle-income folks. That's why there are credits and deductions to help you survive tax season.
1. The Earned Income Tax Credit
The Earned Income Tax Credit was designed to subsidize low-income working families. To qualify for this credit, you must be at least 25 years old and at most 65 . The amount of credit you get is based on your income level and tax status (single, married, etc.). The EITC is especially helpful for people who don't make a lot of money but are supporting children; the maximum credit of $6,044 is available to someone supporting three or more children. People without children are eligible for smaller credits. To find out how much you can get from the EITC, check out IRS.gov.
2. Credits for job hunters
Tax credits can also help offset the costs of job hunting. If you are looking for a job, you can write off certain expenses, even if you did not get any job offers. You can deduct the cost of printing resumes, business cards, and other documents, as well as travel expenses. If you drive your own car, you can receive a credit of $0.565 per mile, and you can also deduct expenses for tolls and parking. You can even count food and lodging expenses if you have to travel overnight. If you get a job that requires you to relocate, you may be eligible for another deduction. People who move more than 50 miles for a new job can deduct the cost of moving, including a deduction of $0.24 per mile if they drive their own car.
3. The Child and Dependent Care Credit
The Child and Dependent Care Credit is a great credit for parents or caregivers. This credit is available to people who paid for care for a child, spouse, or dependent in the last year. You can only claim the Child and Dependent Care Credit for qualifying dependents: children aged 12 or younger or a spouse or dependent who is mentally or physically incapable of self-care. Additionally, the care must have been provided so that you could look for work. The credit can cover up to 35% of qualifying expenses, depending on your adjusted gross income.
4. The American Opportunity Tax Credit
The American Opportunity Tax Credit helps alleviate the tax burden on students in college. The AOTC is a rebrand of the Hope Credit that expands the credit to cover four years of undergraduate education (versus the Hope Credit's two years) and to include expenses like textbooks and supplies. Students who earn more money get less credit, but students with incomes of up to $80,000 are eligible for the full credit of $2,000 on the cost of qualified tuition and materials. Students must be enrolled at least half-time to qualify.
5. The Savers Credit
The Savers Credit exists to help low-income taxpayers save for retirement. It credits taxpayers for making eligible contributions to retirement plans like IRAs, 401(k)s, or other qualified investment accounts. Individuals who earned up to $29,500, married couples filing jointly who earned a combined $59,000, and heads of household who earned up to $44,250 can qualify for the Savers Credit. People who claim this credit must be at least 18 and not full-time students.