With the onset of December, the year comes to an end. In a lot of business sectors, this means extra pressure to finish up the last minute details and work files. Amidst all these, the taxpayers also move in a rush to finish up with the last-minute details. To ensure that your 2019 tax return is as small as ever, it’s crucial to give special attention to the tax breaks that one can make use of.
Of all the tax breaks that taxpayers can look into, tax credits are the most sought-after ones. Indeed, tax credits are quite popular since they can reduce the tax liability on a per-unit basis. Though it may sound lucrative, there is a lot of confusion about who can use them. In order to shed some light on the chaos, the IRS recently gave some valuable guidance in the matters of the tax credit. This seems like the right time to look into the issue before you head out to negotiate with the IRS.
Child tax credit
Individuals with children falling in the 17-year category can receive a tax credit. The minimum amount to be received is $2000 per child. Additionally, up to $1,400 of that amount can be considered as refundable credits for those who fall in the “no-tax” bracket.
This particular tax credit is available to a broader group of taxpayers. For single filers, the income level for this tax credit stands at $200,000, and for joint filers, the amount is at $400,000. As it seems, these credits are quite higher than the previously set amount.
Credit on education
As the name suggests, this tax credit is directed to help taxpayers meet the educational expenses. The American Opportunity Tax Credit pays the total, which is 100 percent of $2,000, and then follows it up by 23% of $2000 for the next four years in college.
Also, the Lifeline Learning Credit pays almost 20 percent of $10,000 in educational costs. It offers quite a broad set of schooling program, including graduation and non-traditional education method.
Dependant credit points
In case an individual cannot make use of the child credit scheme, they can always fall back on the other dependant credit points. This especially goes out for taxpayers having children above 17 years of age. Additionally, this credit can also be taken for old parents, relatives, and others the taxpayer provides financial help to.
Though this credit scheme is quite widespread, the amount lent out is not as handsome as compared to the child tax credit amount. The maximum amount dolled out under this scheme is $500 per dependant. Plus, none of that amount is refundable. However, if an individual owns any form of tax, this credit can be quite useful in reducing the tax bill.
Tax credit on earned income
This is perhaps the most popular tax credit available for low-income and mid-income workers. The amount of the refundable credit largely rests on the family size and the cumulative income. A credit amount of $6,557 is given to individuals with three or more qualifying children. $5828 is given out to individuals with two children, and $3,526 is given to taxpayers with one child.
To qualify for this tax credit, the taxpayer’s child must be below 19 years of age, or a fulltime student below the age group of 24 and must be residing with the taxpayer for more than half of the year. However, those who don’t have qualifying children can also sign up for this credit, but the amount doled out will be moderate. The most significant benefit that this tax credit offers is that it’s refundable. In other words, even if an individual is without any tax liability, they can still have a credit added to the tax refund.
IRS interactive tax assistant
Taxpaying is tough. We all know that, and so does the IRS. Thus, they have launched an online tax assistant to help taxpayers figure out how to apply for the taxes and whether they qualify for specific credit points. This interactive assistant shares information on a host of topics that taxpayers can make use of.
Since the taxpaying season is right around the corner, it’s time to buck up with 2019 tax return planning. If you are eligible for getting tax credits, these pointers can help you size up your tax refunds. So, get started.