This year, don’t forget to take advantage of tax credits and benefits that can save your family money. The following credits are important to taxpayers and their families:
Child Tax Credit: is worth up to $1,000 per child, depending on income. The higher your annual income, the smaller the credit. Married taxpayers who file jointly are subject to a credit reduction at over $110,000 of annual gross income.
Child and Dependent Care Credit: helps parents recoup some of the cost spent for supervision of their children while they work or search for work. The credit covers expenses up to $3,000 for services such as daycare for an individual dependent’s care, and a maximum of $6,000 for two or more dependents. Dependents who qualify for care in terms of this credit include children younger than age 13, a spouse or parent who cannot care for themselves, and other dependents who meet certain individual requirements. Depending on your income, the credit amount ranges between 20% and 35% of your expenses up to the $3,000 threshold ($6,000 for multiple dependents). Taxpayers with an AGI of $15,000 or less can receive the full 35% of the credit. Every $2,000 over the $15,000 in AGI will reduce the credit by one percent. Taxpayers with AGI of over $43,000 can claim 20% of their expenses through this credit. Note: if you pay with a flexible spending account or other tax advantaged program through your employer, the credit may be further reduced.
Earned Income Tax Credit: was designed to help put more money into the hands of low-income earners, relative to the size of their family. Based off your number of dependents, your income, and your filing status (married or single), this credit should be a serious consideration for families with an AGI that falls below $55,000. Be aware that investment income, along with other factors can affect your eligibility for this credit. You must have less than $3,500 in investment income, dividends, or capital gains to claim the EITC. Even if you don’t have any children or dependents, you may be qualified for up to $520 back if your income is less than $15,310 (single) or $21,000 (married, joint filers).