Tax season will seem unbearable, but it is never complete without the silver lining for qualifying taxpayers: The Internal Revenue Service (IRS) offers pretty good tax credits, which can yield refunds amounting to $2,000. These credits serve to alleviate the financial burden and reward specific taxpayers who meet certain qualifications. Let’s put this into proper perspective about this opportunity and how to leverage it.
What Is a Tax Credit?
A tax credit is a dollar-for-dollar reduction of your tax liability. Unlike deductions that lower the income subject to tax, a credit directly reduces the amount of tax you owe. There are refundable types that could even increase your refund if the credit amount exceeds your tax liability.
The Child Tax Credit (CTC): A Key Benefit
The Child Tax Credit (CTC) ranks as one of the most important credits at up to $2,000 for each qualifying child under the age of 17. The child meets the following requirements:
- Age Requirement: The child must be under 17 at the end of the tax year.
- Relationship Requirement: The child must be your son, daughter, stepchild, foster child, sibling, or a descendant of any of these.
- Support Requirement: You must provide more than half of the child’s financial support.
- Residence Requirement: The child must have lived with you for more than half the tax year.
- Income Limits: The credit phases out for single filers earning more than $200,000 and joint filers earning more than $400,000.
How much did taxpayers earn in the saver’s credit in 2024?
According to the Internal Revenue Service (IRS) information, taxpayers earned the following contributions in 2024:
| Credit rate | Married filing jointly | Head of household | All other filers* |
| 50% of your contribution | Adjusted gross income lower than $46,000 | Adjusted gross income greater than $34,500 | Adjusted gross income lower than $23,000 |
| 20% of your contribution | $46,001- $50,000 | $34,501 – $37,500 | $23,001 – $25,000 |
| 10% of your contribution | $50,001 – $76,500 | $37,501 – $57,375 | $25,001 – $38,250 |
| 0% of your contribution | more than $76,500 | more than $57,375 | more than $38,250 |
Additional Tax Credits to Consider
The CTC is an important opportunity, and you may also qualify for the following credits:
- Earned Income Tax Credit (EITC): This credit is for low- and moderate-income earners. Depending on income and number of dependents, it can save you thousands.
- American Opportunity Tax Credit (AOTC): Up to $2,500 for the first four years of expenses associated with higher education.
- Child and Dependent Care Credit: Covers childcare or dependent care expenses with up to $1,050 for one dependent or $2,100 for two or more.
How to Claim These Credits
- File Your Tax Return: A tax return must be filed to claim a credit; even if you earn less and don’t have to file, you still need one.
- Provide Supporting Documentation: Keep records of income, expenses and proof of eligibility, such as Social Security numbers for dependents.
- Use IRS Tools: The IRS has various online tools such as the Child Tax Credit Eligibility Assistant to check on eligibility.
Conclusion
Tax credits can significantly reduce your financial burden, but one has to know how to use them, to maximize the savings. Whether it is the Child Tax Credit, Earned Income Tax Credit, or other, make sure to check eligibility and claim the benefit.
Time for tax preparation. Perhaps the best advice may come from a tax professional, or at least from a trusted software system, but it promises that every credit will get captured. Don’t leave anything on the table-move on!
