Got Taxes?
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Some commonly overlooked tax savings items are tax credits. Many times after you've gone through the frustrating gyrations required to calculate your tax liability, you just quickly glance at the tax credits, because in the past, credits have always been some obscure utility credit for building windmills in Australia (something everyone does). But wait, you may have hastily passed up some very viable reductions to your tax liability. Tax credits are actually more valuable than tax deductions, because you get a dollar-for-dollar reduction to your tax liability versus just a reduction to your taxable income. So slow down, take a deep breath and review these common tax credits…and maybe, Uncle Sam won't take ALL your hard-earned money. (As always because each individual's tax situation is unique, check with your tax advisor before applying any of these tax-saving strategies).
Credit for Child and Dependent Care Expenses – This credit may be available to you if you paid someone to care for your child under age 13. The Child and Dependent Care credit is based on your Adjusted Gross Income (AGI) and requires additional calculations.
Child Tax Credit – This credit is in addition to the Child and Dependent Credit mentioned above. Depending on your modified AGI, you may qualify for a tax credit for each child under the age of 17.
Education Credit – If you (or your dependent) incurred any expenses for yourself, your spouse, or your dependent toward obtaining a degree, some of those costs may qualify for the Lifetime Learning Credit. Again, you may be limited by your AGI.
Adoption Tax Credit – If you recently adopted a child, you may be eligible for this credit. The credit is higher for "special needs" children. The credit is based on your AGI.
Foreign Tax Credit – If you paid income tax to a foreign country, you may be able to take this tax credit. If you invested in any international mutual funds or other foreign investments, you may qualify for this credit.
Electric Vehicle Credit – This credit is becoming more common as electric cars become more popular. If you recently placed an electric vehicle in service, some of your costs may qualify.
Unfortunately, if you are required to pay Alternative Minimum Tax (AMT), you may not receive any tax credit benefits. Check with you tax advisor to identify which tax credits you may take.
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