Tax credits directly offset your tax liabilities, they reduce your tax bill dollar for dollar, therefore are a lot more valuable than tax deductions. Below is an incomplete list of some of the most popular tax credits:
- Earned Income Tax Credit - This refundable tax credit is geared for low income individuals and families as way to relieve their tax burden. There are income requirements that must be met to receive this tax credit.
- Child and Dependent Care Credit - This tax credit is for individuals and families who provided care for a qualifying person. Depending on your adjusted gross income, this credit can be used toward a maximum of 35% of qualifying expenses.
- American Opportunity Credit - Worth up to $2,500 (and up to $1,000 is refundable) for certain higher education expenses.
- Retirement Savings Contributions Credit - This tax credit is based on your contribution to qualifying retirement plans and your income.