Cashing IRS Stimulus Checks: Even though the U.S. government has announced some states will not receive stimulus funds like those offered in 2021, some taxpayers may still be eligible for benefits.
Tax deductions and tax credits are two main categories of tax benefits.
Tax credits reduce the amount of tax you owe by a dollar, while tax deductions give you a smaller benefit by reducing your taxable income.
A second consideration with tax deductions is that you will not benefit from them unless you itemize your deductions, which is only feasible for individuals with substantial deductible expenses.
What types of tax payments will you be able to collect?
Child tax credit
With the Child Tax Credit (CTC), families with qualifying children are able to reduce their tax liability.
This year, the CTC could grant you up to 2,000 dollars per qualifying child with a Social Security number and under the age of 17 at the end of 2023, with 1,600 dollars of the credit potentially refundable.
Child and Dependent Care Credit
Parents unable to care for their children under 13 may qualify for the child and dependent care credit.
One dependent may receive 35 percent of 3,000 dollars or two or more dependents may receive 6,000 dollars.
American Opportunity Tax Credit (AOC)
To qualify for the American Opportunity Tax Credit (AOC), you must spend 2,000 dollars on tuition, books, equipment, and school fees, but not living expenses or transportation. You may then claim 25 percent of the next 2,000 dollars, for a total of 2,500 dollars.
Lifetime Learning Credit
To claim Lifetime Learning Credits, you need to spend at least 10,000 dollars on tuition and fees in order to qualify.
The Lifetime Learning Credits do not cover living expenses or transportation expenses, but you may claim books and supplies.
Student loan interest deduction
Borrowers who have paid interest on their student loans may deduct up to 2,500 dollars from their taxable income.
Adoption credit
Adoption credits are non-refundable tax exemptions that are intended to assist taxpayers in covering qualified adoption costs.
As your modified adjusted gross income (MAGI) exceeds the threshold set for that tax year, the credit begins to phase out.
A maximum credit of 15,950 dollars is available for 2023 (taxes filed in 2024).
Earned Income Tax Credit
EITC (Earned Income Tax Credit) reduces your tax liability and increases your refund if you qualify.
The credit ranges from 600 to 7,430 dollars this year, depending on your marital status, income, and number of children.
Saver’s credit
There may be a tax credit available for contributions made to an employer retirement plan, an Individual Retirement Arrangement (IRA), or to an Achieving a Better Life Experience (ABLE) account where you are the designated beneficiary.
According to the IRS website, the amount of this credit may range from 10 percent to 50 percent, depending on your contribution level and your adjusted gross income.
Residential Clean Energy Credit
Credits for residential clean energy installations between 2022-2032 equal 30% of the cost.
Except for fuel cell property, there is no annual or lifetime dollar limit to the credit. You may claim the annual credit until the credit phases out in 2033.
Electric Vehicle Tax Credit
Plug-in electric vehicles (EVs) and fuel cell vehicles (FCVs) may be eligible for a clean vehicle tax credit.
Credit will not be available to you if the seller fails to inform you of your vehicle’s eligibility.
Dealers are also required to register online and report the same information to the IRS.
