One of the best ways to save valuable tax dollars is to take advantage of the many tax credits and tax deductions provided by the IRS tax code. Some of these tax breaks were eliminated with the passage of the Tax Cuts and Jobs Act of 2017 but many still remain. Although both tax deductions and tax credits reduce overall tax liability, tax credits are the more valuable of the two because they provide for a dollar for dollar reduction in taxes owed while deductions only provide a percentage decrease in taxable income based on the taxpayer’s tax bracket.
The following are a few tax credits that you will not want to miss!
· Earned Income Tax Credit
The Earned Income Tax Credit is designed to help individuals and families with low to moderate incomes save valuable tax dollars. Although this tax credit is available to any taxpayer who meets certain specified income requirements, it is most beneficial to those with dependent children. The income ceilings for receiving the Earned Income Tax Credit run from $20,950 for married couples filing jointly with no children to $54,884 for those with three children. Income limits for single or head of household filers are slightly less for the same number of dependent children. One further restriction is that taxpayers with over $3500 of annual investment income are ineligible to receive the credit. In terms of the 2018 tax benefit, families with three or more dependents received a maximum Earned Income Tax Credit of $6431 while those with two, one and zero dependents received maximum credit amounts of $5716, $3461 and $519 respectively (note the big leap in going from one child to no children). Both income limits and maximum tax credit amounts have been increased slightly for 2019.
· Child Tax Credit
The Child Tax Credit is a tax credit designed to reimburse working taxpayers for expenses incurred in providing care for dependent children under the age of 17. Under the provisions of the Tax Cuts and Jobs Act, the Child Tax Credit can be worth up to $2,000 for each qualitfying child. In addition, it provides for a refundable amount of 15% of any earned income that exceeds $2,500 up to a maximum of $1400. The Child Tax Credit is available to all taxpayers, with phase out limits that begin at $200,000 and $400,000 for single and joint filers respectively.
· Premium Tax Credit
The Premium Tax Credit is a tax credit designed to help low to moderate income taxpayers cover premiums for health insurance policies purchased through the Health Insurance Marketplace. Marketplace computes the amount of the tax credit at the time a policy is purchased, with lower income individuals and families receiving larger credit amounts. At that time, the enrolling taxpayer can choose to have monthly health insurance premiums reduced by advance payment of the Premium Tax Credit or to receive the entire tax benefit at the time the annual income tax return is filed. In either case, the taxpayer must complete Form 8962 and file it with the income tax return at tax time. If the tax credit is more than the taxes owed, a refund will be issued. On the other hand, if the amount of the advance credit payments is greater than the allowable amount of the tax credit, the difference will either be subtracted from the tax refund amount or added to the tax balance due at the time of filing.
The licensed professionals at Las Vegas Bookkeeping are experts in the area of tax planning and can help you save you valuable tax dollars by taking advantage of all tax breaks that apply to your particular financial situation. Receive a free, no obligation consultation by emailing email@example.com or calling us at (702) 514-4048. Don’t wait! Let the tax professionals at Las Vegas Bookkeeping help you get your financial affairs in order so you can achieve the maximum possible tax advantage!