Everyone has to pay taxes. It's part of our daily lives in almost everything we purchase. Taxes are taken out in nearly every profession, whether you pay them with each paycheck or at the time of income tax filing. Since everyone has to pay these taxes, then everyone should get a break on them, right? Below are several credits and deductions you can apply for when you file(or e file) your taxes that cater to everyday individuals who have to pay taxes. If you're wondering what is the difference between credits and deductions, here's a little blurb from a previous article I wrote to explain. We hope you find some of this info useful, and hope it helps you get a great refund!
 |
| Click here for source |
Difference Between Credits and Deductions:
Many people may have never learned the difference between tax credits and tax deductions. The actual definition of a tax credit is something that reduces your actual tax amount that you have to pay when you file your taxes. This is different from a deduction because a deduction only reduces your taxable income. This difference makes tax credits much more beneficial, and dollar for dollar the credit will be a better deal because it is directly subtracted from the tax owed. Here are a few tax credits that you may not know you qualify for.
The amount you paid for child care can be counted as a tax credit. The credit starts at thirty-five percent if your adjusted gross income is less than $15,000 and reduces to twenty percent if your adjusted gross income is more than $43,000. This goes to a maximum of $3,000 for one child and $6,000 for two or more children. The Internal Revenue Service requires you treat most home child care workers as employees of the household(one of the few exemptions to this rule are part-time babysitters under the age of 18).This credit is one of the most complicated credits to figure out, but nothing that is worthwhile is easy.
Dependents:
Taken from http://onlinetaxprofessionals.blogspot.com/2011/12/online-taxes-understanding-family-in.html:
First, you need to know that your family is referred to as “dependents.” This may be less true in the case of a spouse, as they may even be making more money than you. If you have young children, you know that the term “dependent” is pretty accurate. To subtract from your Adjusted Gross Income, the IRS requires you to have such dependents and this is when family can help you save money on your tax returns.
Last year a new exemption allows you to benefit from a $3,650 break on your AGI for each qualifying child. They don't have to be biological, and can be a foster or step-sibling, and even grandchildren. These individuals must be 19 or under and live in your residence at least half the year. These children must not provide more than half of their own support or they do not qualify. More good news is that both you and your spouse may reap an additional $3,650 just for being parents as a personal exemption!
Children are not the only family members you can claim, but there are more strict requirements for claiming parents, grandparents or other relatives. These relatives are still worth $3,650 but have to qualify for these major stipulations. First, the person must be a full-time member of your household. Next, they must be a legal citizen of the United States and they cannot file a joint return with anyone. You must also provide the majority of their support and they must make less than $3,650 for their AGI.
You might be asking yourself, so who actually does qualify as a relative? They have to have first been a member of your household for the whole year you're claiming them, blood relative or not. If they didn't live with you the whole year, they have to be a bit closer to you. The relatives considered by blood and marriage are children, grandchildren(including steps), siblings(half and step), parents, grands and other direct ancestors. Stepparents, uncles, aunts, nieces, nephews, and immediate in-laws. Using these guidelines, your family can help you save in this troubled economy. Using a qualified tax professional like Online Tax Pros can help you file online and save the most on your refund! We look forward to seeing you save.
Here are a few other credits for your dependents, taken from http://onlinetaxprofessionals.blogspot.com/2012/01/online-tax-article-credits-and.html:
Education Tax Credits: These two credits can't be claimed by any one person, but they are good for if you have a custody agreement to give one to each parent. The first is the Lifetime Learning Credit. This credit gives you a maximum of $2,000 for tuition fees and up to $4,000 for students in disaster areas of the Midwest. You can claim this credit every year your child is enrolled in undergraduate and graduate college programs.
Next, the Hope Credit only applies to the first two years of college or technical education courses. This credit is valued at $1,800 per student for parents or college-enrolled dependents, and the value increases to $3,600 if you're in the Midwestern disaster areas as with the Lifetime Learning Credit.
Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.
Child Tax Credit: This $1,000 tax credit is available for each child in the cases of most single parents. However, if the household income is more than $75,000 and the filing status is single, qualifying widow(er) or head of household, the credit decreases in value. Only the parents with primary custody get to take advantage of this credit, but if there is a shared-custody agreement, it's up to the parents' discretion how they can either alternate or let one parent have it each year.
Child Care Credit: It's hard to watch your kids all the time. The Internal Revenue Service knows this, and has put forth a credit that allows you some help and not make every day “take your child to work day.” You have to include the name and tax identification number for the child care provider at the time of filing. This credit allows you to claim $3,000 on one child, and up to $6,000 for two or more children. This is completed on IRS form 2441 and attached to your 1040 tax return.
Earned Income Tax Credit: This credit was created to help families in lower income brackets. You're almost guaranteed a refund if your taxes owed are less than the Earned Income Tax Credit.
According to irs.gov, the values for 2012 are as follows:
Earned Income and adjusted gross income (AGI) must each be less than:
$45,060 ($50,270 married filing jointly) with three or more qualifying children
$41,952 ($47,162 married filing jointly) with two qualifying children
$36,920 ($42,130 married filing jointly) with one qualifying child
$13,980 ($19,190 married filing jointly) with no qualifying children
Tax Year 2012 maximum credit:
$5,891 with three or more qualifying children
$5,236 with two qualifying children
$3,169 with one qualifying child
$475 with no qualifying children
Investment income must be $3,200 or less for the year.
Claiming College Students as Dependents: When your kids go off to college, you can still continue claiming your child as a dependent as long as they are enrolled full-time. Keep in mind though that if your children are working as well as going to a University, they can't claim an exemption on themselves if you have already claimed them with this deduction.
Hopefully these credits and deductions will give you a big refund. In these hectic times you can always e-file with Online Tax Pros and get your taxes taken care of from home. This will allow you to get your refund directly deposited in your bank account for your disposal. You definitely deserve it for all the hard work you do to take care of your children.
Next, the Hope Credit only applies to the first two years of college or technical education courses. This credit is valued at $1,800 per student for parents or college-enrolled dependents, and the value increases to $3,600 if you're in the Midwestern disaster areas as with the Lifetime Learning Credit.
Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.
Child Tax Credit: This $1,000 tax credit is available for each child in the cases of most single parents. However, if the household income is more than $75,000 and the filing status is single, qualifying widow(er) or head of household, the credit decreases in value. Only the parents with primary custody get to take advantage of this credit, but if there is a shared-custody agreement, it's up to the parents' discretion how they can either alternate or let one parent have it each year.
Child Care Credit: It's hard to watch your kids all the time. The Internal Revenue Service knows this, and has put forth a credit that allows you some help and not make every day “take your child to work day.” You have to include the name and tax identification number for the child care provider at the time of filing. This credit allows you to claim $3,000 on one child, and up to $6,000 for two or more children. This is completed on IRS form 2441 and attached to your 1040 tax return.
Earned Income Tax Credit: This credit was created to help families in lower income brackets. You're almost guaranteed a refund if your taxes owed are less than the Earned Income Tax Credit.
According to irs.gov, the values for 2012 are as follows:
Earned Income and adjusted gross income (AGI) must each be less than:
$45,060 ($50,270 married filing jointly) with three or more qualifying children
$41,952 ($47,162 married filing jointly) with two qualifying children
$36,920 ($42,130 married filing jointly) with one qualifying child
$13,980 ($19,190 married filing jointly) with no qualifying children
Tax Year 2012 maximum credit:
$5,891 with three or more qualifying children
$5,236 with two qualifying children
$3,169 with one qualifying child
$475 with no qualifying children
Investment income must be $3,200 or less for the year.
Claiming College Students as Dependents: When your kids go off to college, you can still continue claiming your child as a dependent as long as they are enrolled full-time. Keep in mind though that if your children are working as well as going to a University, they can't claim an exemption on themselves if you have already claimed them with this deduction.
Hopefully these credits and deductions will give you a big refund. In these hectic times you can always e-file with Online Tax Pros and get your taxes taken care of from home. This will allow you to get your refund directly deposited in your bank account for your disposal. You definitely deserve it for all the hard work you do to take care of your children.
The American Opportunity Credit was originally supposed to end in 2010, but it was extended through 2012. However, this could be the credit's last year. Congress is looking for ways to cut the federal deficit, and allowing tax breaks to expire is an easy way to save some dollars. If you have eligible education expenses, be sure to claim the American Opportunity Credit while you can.
Read more: 12 Tempting Tax Tips For 2012 | Bankrate.com http://www.bankrate.com/finance/taxes/12-tax-tips-2012-1.aspx#ixzz1pfaxuVye
Tip 10: Give gifts:Giving to charity can help reduce an annual tax bill, but if you have a large estate, gifts also are important estate tax tools. Thanks to the resurrection of the estate tax in 2011, the unified gift tax also returned. This means you can give away $5 million during your lifetime without having to pay the 35 percent gift tax.
There's also an annual amount to note in giving away your estate's assets while you're still around to get thanks. In 2012, you can give up to $13,000 each to as many individuals as you wish without any tax costs to you or your gift recipients.Read more: 12 Tempting Tax Tips For 2012 | Bankrate.com http://www.bankrate.com/finance/taxes/12-tax-tips-2012-1.aspx#ixzz1pfb8osVn
Kay has two very informative, well-known and respected tax blogs that you should subscribe to! Here are links to her Bankrate Blog and Don't Mess With Taxes.
Please give her some tax nerd love! She's a very inspirational blogger and helped me share lots of great info on my Twitter page when I started out. Leave a comment on her blogs or my own if she's helped you with your taxes. She's definitely a pro and worth reading!
And our blog: http://www.onlinetaxprofessionals.blogspot.com
Please like us on Facebook: http://www.facebook.com/onlinetaxpros
and follow us on Twitter: @onlinetaxpros
This article can widen the knowledge of taxpayers regarding the difference between tax credit and tax deduction, and the various transactions by which they can claim them. Since taxes are considered as an enforced contribution levied upon taxpayer’s incomes, property, and sales, taxpayers should also avail of the privilege that they can get from tax deduction and tax credit. Availing of tax credit, wherein the final taxable amount is reduced, and tax deduction wherein a certain amount is deducted to the tax imposable, will be very beneficial to the taxpayer because he can get an excess amount that he can use for future tax payments.
ReplyDeleteNelson Sottile
Thank you for the comment!
DeleteTax credit and deduction are methods to help reduce the burden of an individual in paying his/her taxes. These are based on certain categories of income or expenses. Despite these two methods’ differences, both can be helpful in dealing with one’s tax responsibilities.
ReplyDelete@ Jeanie Yearsley
Thanks for expanding on my topic, have a great day!
Delete“Giving to charity can help reduce an annual tax bill”- This is true. I know a lot of people who do this. Great approach, right? And I know the people who do this feel great about giving too, and I’d like to believe they do this not for the sake of reducing their taxes but to sincerely help. Nothing beats the feeling of knowing your money will be used for a good cause, and that’s what matters. ;)
ReplyDeleteParris Moretti
It is a great approach, in my opinion! I wish more people had a gracious and giving attitude, then maybe our economy wouldn't be in this position.
DeleteI share the same sentiments as you do, Greg and Parris! Not only do you help reduce your tax, but you get to help people in need as well. It’s really nice to see well-off individuals lend a hand sometimes. Let’s just really wish that more kindhearted citizens will do the same as more people become happier. :)
ReplyDeleteWystan Dale
Yep, if everyone did something nice for someone else without expecting anything in return, I don't think we would be prepared for what the world would look like! Thanks for the comment!
DeleteEvery citizen who is paying taxes should be equipped with these helpful tips. Deductions and credits from one’s tax can be a big help, especially when they’ve accumulated. So knowing these will surely give them a helping hand in dealing with their financial concerns.
ReplyDeleteLauren Padilla
I agree, glad you came by my neck of the woods to post that constructive comment. Have a great day!
Delete