Claiming credits on your taxes will save you more money than taking tax deductions. A credit is a decrease in the amount you owe the IRS. A deduction is a only a decrease in gross revenue (income) before you figure how much tax you owe.
Here are some of the most common credits taxpayers may be able to take.
1. Education Tax Credits: There is the Hope Credit and the Lifetime Learning Credit. The Hope credit is for college tuition payments for you, your spouse or dependent. You can claim this credit for the first two years of college, for up to $1,650. On the Lifetime Learning Credit, you can claim up to $2,000 every year you, your spouse or dependent are in college. For more info on these credits, read this post.
2. Adoption Tax Credit: Adopting a child can be very expensive, but you can claim a credit of up to $10,690 for the costs associated with adoption. There are certain rules you must follow in order to qualify for this credit, so you may want to contact a tax professional about your options. There is an income cap of $164,410 to be able to claim this credit.
3. Going Green: For several years now, the government has encouraged taxpayers to use more energy efficient products in in their homes, as well as hybrid vehicles. Energy efficient appliances, windows, water heaters, and solar panels can be a huge credit on your taxes.
4. Retirement Savings Tax Credit: The government gives tax credits to taxpayers who earn less than $25,000 as a single filer and $50,000 as joint filers while they put money in a retirement credit. The credit can be up to $1,000 depending on how you filed.
There are many other credits for which you may qualify. Talk to a tax professional to find out which credits you can claim.
