Best Credits Available to Taxpayers
By Tim Frye
Everybody wants a little credit. When you work hard, you want it from your wife. When your son hits a jumper, he wants it from you. When you wife finally cooks up a decent meal, she wants it from you. Well, the tax game is no different. When your client is settling up with the IRS, they want their. Credits can be an extremely powerful antidote to taxation, because they can eat away at tax liability dime for dime, and can even give money back once the taxpayer’s liability reaches zero, if the credit is considered refundable. Lets go through the top credits and their benefits, and give an additional layer of knowledge to drop on your client.
Earned Income Credit
This may seem like an obvious choice to any tax preparer who has completed more than a few tax returns. The Earned Income Credit is the most valuable refundable tax credit in the game right now. The EIC is an anti-poverty program that saw it’s genesis in the early seventies during the Jimmy Carter administration. For those taxpayers who report poverty level income, and have dependents, the credit can pay up to almost $6,000 back to the individual. Their are a few requirements to gain access to the EIC. The taxpayer and the dependents claimed must have social security numbers. The dependents must also fall under the guidelines defining the qualifying child or qualifying relative requirements. As the credit states in its name, the key is that taxpayer have a certain amount of EARNED income to qualify for the credit.
Child Tax Credit
The child tax credit is accessible to taxpayer claiming children who are under the age of 17 by the end of the tax year in question. It is refundable under the surname of the Additional Child Tax Credit, and it can pay up to $1,000 for each qualifying child. To claim the credit, the taxpayer must be able to claim the child as a dependent. Essentially, your client must be related to the dependent to be able to access the credit, and their income must be above poverty level to receive the entirety of it’s benefit.
American Opportunity Credit
The American Opportunity Credit is offered to those taxpayers who have expenses relating to their first four years of post-secondary education. The credit can allow up to $2,500 of the first $10,000 of school expenses to be refunded to the taxpayer. This is a superior credit, because it will offer a sense of solace and relief to those of your clients who are students looking to get their bachelors, who on most occasions have little income to rely on in their young lives. The partial refund of their qualifying expenses is meant to keep them motivated to finish school and move up in the world. Keeping people upwardly mobile is obviously the Government’s intention when it comes to the American Opportunity Credit.
