What Are the Federal and State Income Tax Credits?

Tax credits decrease tax payments. Think of credits as slices of an apple-the more credits (or apple slices) you take, the more of your money that you can keep. You can decrease your tax payments as well! 

What Are the Federal Tax Credits?

Below are the tax credits that you can claim on your IRS federal tax return: 

Child Tax Credit

With the Child Tax Credit, you can claim up to $1,000 for each dependent child. You can use the credit to help you save money for having children.

Adoption Tax Credit

If you adopted a child, you can claim the Adoption Tax Credit to help you with any expenses you paid when you adopted the child.

What Is an Eligible Child? 

An eligible child is someone under 18 or a person with special needs that lacks the ability to take care of his or herself.

Child and Dependent Care Tax Credit

To save money on expenses related to raising children, a qualifying spouse, or a qualifying dependent, you can claim the Child and Dependent Care Tax Credit. These expenses can be for taking care of children on your own and/or those watching your children while you work or look for a job. 

Elderly and Disabled or Senior Tax Credit

If you are 65 years or older, or if you are permanently disabled with taxable disability income, you can claim the Elderly and Disabled or Senior Tax Credit. However, your income must not exceed certain limits based on your filing status, Adjusted Gross Income (AGI), and your nontaxable Social Security and other nontaxable pensions.

Residential Energy Efficient Property Credit

For installing a renewable-energy source in your house (solar panels or a geothermal heat pump), you can claim the Residential Energy Efficient Property Credit. It can be worth up to 30% of your expenses. 

Earned Income Tax Credit

You can claim the Earned Income Tax Credit (EITC) if you have a low to moderate income. The EITC can reduce your tax payments and it may increase your refund.

Foreign Tax Credit

If you have foreign income from a different country, the Foreign Tax Credit can help you relieve any double tax burden. Only taxes collected or paid to a foreign country or U.S. possession qualify for the credit.

Premium Tax Credit

As a taxpayer with a low or moderate income purchasing health insurance via the Marketplace at HeathCare.gov, you may qualify to claim the Premium Tax Credit. You may choose to pay the credit in advance to your insurance company to decrease your monthly premium payments or claim the entire credit on your return as a tax refund. 

Student Tax Credits

There are two education tax credits: 

  • American Opportunity Credit
  • Lifetime Learning Credit

One student cannot claim both credits in the same year. 

Saver's Tax Credit

If you contribute to a retirement plan, you can claim the Saver's Credit to have you save tax payments on retirement contributions. The exact amount of your credit varies based on your filing status, income, and the amount of your qualifying contributions. 

Hybrid or Electric Car Tax Credit

There are two tax credits available to those who purchased an energy-efficient car during a Tax Year: 

  • Alternative Motor Vehicle Credit
  • Tax Credit for Plug-in Electric Drive Motor Vehicles

Residential Energy Efficient Property Tax Credit

For installing renewable-energy sources in your house, you can claim the Residential Energy Efficient Property Credit. It is worth up to 30% of any expenses you paid for installing the energy source. 

Tax Credits for American Citizens Living and Working Abroad

If you're a U.S. citizen or resident alien living or working in a foreign country during the Tax Year, you can claim any of the tax credits listed above.

What Are the State Tax Credits?

Though most state tax credits are connected to federal credits, they have many differences based on the state. You can learn more about specific state credits on Taxpert.com's separate state pages. 

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