Do you want to reduce your tax bill this year? You can maximize your tax savings by checking to see if you’re eligible to claim any of the new expanded tax credits.
The difference between a tax credit and a deduction is a deduction reduces your taxable income, whereas credits reduce the amount of tax you pay directly.
Refundable credits are even better because they can reduce your tax bill even if the credit is worth more than you owe. Non-refundable credits are only valid up to the amount you owe.
We’re going to look at how much seven of the big tax credits are worth.
Table of Contents
How Much is The Earned Income Tax Credit (EITC)?
For the tax year, the credit can range from $538 for no qualifying children to $6,660 for three or more children who qualify.
The EITC is the number one credit you should aim for if you’re a low-income family. It’s a refundable tax credit you can claim if you qualify.
The requirements are you need to be a US citizen or resident alien with an earned income, a valid social security number, and an investment income of under $3,650 for the current tax year.
It can’t be claimed if you’re married and filing separately.
When you file, the EITC income limit for taxpayers with no qualifying children is $15,820 for single taxpayers and $21,710 for married couples filing jointly.
If you have qualifying children, the EITC scales up to a maximum of $50,594 and $56,844 for singles and couples with three qualifying children, respectively.
How Much is the Child Tax Credit?
The child tax credit is a non-refundable tax credit providing up to $2,000 per child this tax season.
The Tax Cuts and Jobs Act (TCJA) increased the credit up to $2,000 until 2025 to offset the removal of many personal exemptions.
These changes will become apparent in the taxes you file your tax return.
Income phaseouts have also been increased until 2025.
Your modified adjusted gross income where the phaseout begins is $200,000 for single taxpayers and $400,000 for married couples filing jointly.
It represents an increase of $75,000 and $110,000, respectively.
There are seven different criteria a child must meet, including age, amount of support, relationship, claimed dependency, citizenship, how much time the child spends in your home, and your overall family income.
What if your tax bill isn’t high enough to claim the full credit?
You could qualify for the Additional Child Tax Credit, which is a refundable tax credit. This enables taxpayers to claim the difference of $1,000 this year and $1,400 from April 2019.
Form 8812 will enable you to see if you qualify.
How Much is The Non-Child Dependent Credit?
This is a new non-refundable tax credit worth $500 to cover any dependents who don’t qualify under the child tax credit.
For example, this could be a child who’s 17 or older or any dependents like elderly parents. This credit can’t be claimed for yourself or your spouse when filing jointly.
This credit can be claimed when you file your taxes until the 2025 tax year.
How Much is The Child and Dependent Care Tax Credit?
You can claim a maximum of $3,000 in care expenses for a single qualifying dependent or $6,000 for two or more.
It covers from 20% to 35% of any allowable care expenses. It’s based on income with no phaseout.
This tax credit is relevant if you pay care costs relating to any dependents in your household, including children and the elderly.
It’s designed to offset any costs incurred because you must work or to help you find work.
How Much Are Education Tax Credits?
The Lifetime Learning Credit can be used to cover $2,000 per year if your modified adjusted gross income is below $65,000 as a single taxpayer or $130,000 if you’re a married couple filing jointly.
Another education credit is the American Opportunity Tax Credit (AOTC), where you can claim a maximum of $2,900 for each eligible student every year for four years.
Your modified adjusted gross income must be below $90,000 as a single taxpayer or $180,000 for married couples filing jointly.
40% of the AOTC is classified as refundable.
However, you can only claim one of two tax credits per student.
The deduction for education tuition and fees was removed as part of the TCJA. However, tax credits can offer you an alternative way to make savings from your education.
How Much is The Savers Credit – Retirement Savings Contribution Credits?
This may also be known as the Saver’s Credit. This tax credit offers a tax reduction of up to 50% of your contributions to an IRA or any other retirement plan provided by your employer, such as your 401(k).
The credit is available if you have an adjusted gross income of $18,500 or less for a single taxpayer or $37,000 for a married couple filing jointly for the coming tax year.
It does phaseout. It can fall to 20% and 10% of your overall contributions before it phases out completely if you earn $31,000 as a single taxpayer or $62,000 as a married couple filing jointly.
How Much is The Healthcare Premium Tax Credit (PTC)?
The PTC tax credit is available if your household income is below 400% of the Federal poverty line, based on the size of your family.
For the taxes filed in April 2018, this limit is $11,880 for individuals and $4,140 per additional family member in your household.
Obamacare hasn’t been completely killed off by the current administration. The penalty for not having health insurance won’t be removed until 2019.
The PTC continues to exist for people who want to purchase health insurance through the general marketplace.
Although some of the new tax law changes may seem to be insignificant, you could save a substantial amount on your next tax return by applying these updated rules and regulations accordingly.
Keep in mind that these types of changes tend to happen on an annual basis, so make sure you stay on top of amendments to maximize your benefits.
How to Claim Tax Deductions and Credits
Don’t worry about knowing these new tax credits and deductions and how to claim them.
Online tax filing asks simple questions about you and helps you easily claim every tax credit and deduction possible.
The online program finds all the new tax deductions and credits you are entitled to for the largest possible refund. It’s the most complete free tax filing solution for everyone.