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Top Ten Tax Credits and Deductions

Five dollar bill and one dollar bills - tax credits and deductions

By Alejandra Okie

This year, make sure you don’t miss out on important tax credits and deductions that could save you thousands of dollars. You must file a federal tax return to receive these credits and deductions. Learn more about the top ten tax credits and deductions.

1. For working people (Earned Income Tax Credit - EITC):

  • What is it?: The Earned Income Tax Credit (EITC or EIC) is a credit that can help individuals and families with low to moderate incomes pay less in taxes. If you qualify, you could get a credit of up to $6,143.
  • Can I qualify?: You could qualify if you worked in 2013 and you earned a low to moderate income. For example, if you are married and filing jointly and have two children, your adjusted gross income must be less than $48,378 (or $43,038 if single with two children). You must have a valid Social Security number.  

2. For families with children: 

  • What is it?: With the Child Tax Credit you can save up to $1,000 in taxes for each child in your family. You can get money back even if you don’t owe money in taxes.
  • Can I qualify?: You can include any of your children who are under 17 years old and lived with you for more than half the year. In order to receive the credit you must have earned over $3,000 a year. You and your child must have a valid Social Security number or ITIN.

3. For families with child and dependent care expenses:

  • What is it?: The Child and Dependent Care Credit can reduce the amount of money of taxes you owe if you paid someone to take care of your child (under age 13) or a qualifying dependent (unable to take care of themselves) so you could work or look for work.
  • Can I qualify?: You (and your spouse, if filing jointly) must have earned income, been a full-time student or have been unable to care for yourselves. Your child or qualifying dependent must have lived with you for more than half of the year. Each dependent you include must have a valid Social Security number or ITIN. 

4. For students: 

  • What is it?: Sudents can either get a tuition deduction (to reduce the amount of income subject to tax by $4,000 or less) or an education tax credit of up to $2,500 (American Opportunity Credit or Lifetime Learning Credit). If you have a student loan, you may be able to reduce the amount of your income subject to tax by up to $2,500.
  • Can I qualify?: You can claim the credits and deductions if you’re studying in a postsecondary program (after high school). However, the Lifetime Learning Credit can be used for classes to improve your job skills (including non-degree programs). The income limits are different for each credit and deduction. 

5. For retirement savings: 

  • What is it?: With the Saver’s Credit (Retirement Savings Contribution Credit) you can get a tax credit of up to $1,000 (or $2,000 if filing jointly) if you make contributions to an IRA account or employer-sponsored retirement plan. This credit can reduce the federal income tax you pay.
  • Can I qualify?: You must have an adjusted gross income of not more than $59,000 if married and filing jointly, $44,250 if head of household, or $29,500 if you’re single, married filing separately or a qualifying widow(er). 

6. For homeowners:  

  • What is it?: If you’re a homeowner, you can deduct your home mortgage interest on your tax return if the mortgage is a secured debt on your main home or second home. In most cases, you can also deduct the real estate taxes you paid. Homeowners who made energy-saving and green-energy home improvements to their main residence may be able to save money with one of two energy credits. Note: the first-time homebuyer credit is no longer available.
  • Can I qualify?: In order to deduct your home mortgage interest, you must itemize your deductions. 

7. For business owners and the self-employed:

  • What is it?: If you’re a business owner or are self-employed, you may be able to deduct business expenses on your tax return. Your state may also have certain tax breaks available.

8. For teachers:

  • What is it?: Educators who have spent their own money on books and/or school supplies may deduct up to $250 (or $500 if married filing jointly and both spouses are educators) to help reduce the amount of taxes they pay.
  • Can I qualify?: You may qualify if you’re a teacher, instructor, counselor, principal or aide who works at least 900 hours per school year in kindergarten through grade 12.

 

Get started now and file online for free at MyFreeTaxes!

 

Photo: Dan Fellini 

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