4 Tax Credits For Low-Income Earners You May Not Know About
A tax credit can help you save money on your income taxes. These four credits are designed to help reduce the amount that you owe in taxes each year. They are specifically designed to help low-income earners save money on their taxes. The savings can be significant and help you increase the amount you get refunded each year.
According to the IRS, if you make less than $60,000 per year, you can claim a portion of the first $2,000 you contribute to your IRA or 401(k). If you are married filing jointly and make less than $36,000, you can claim up to fifty percent of the contribution. If you make between $36,001, and $39,000, you can claim twenty percent. If you make between $39,001 and $60,000, you can claim up to ten percent of the amount you contributed. If you make more than $60,000 a year, you do not quality for the additional credit.
Earned Income Credit
The Earned Income Credit is designed specifically for people who are low-income workers. The credit phases out depending on your salary and the number of children that you have. It is designed to help people who are struggling to get by. The credit can go up to $6,044, if you have three or more children. It is worth checking with your accountant to see if you qualify. Additionally, if you need the extra money during the year, you can sign up to have it paid to you through out the year by filling out your W-4 to reflect that you qualify for it. However, if your tax situation changes due to a raise or something similar, you will need to stop payment in the middle of the year.
Additional Child Tax Credit
Many people know about the child tax credit that allows you to receive a tax credit of $1,000 for each child you can claim. However, if you end up owing less in taxes than your child tax credit, you can claim the additional child tax credit to receive the remaining balance of the credit back in taxes. This can significantly increase the amount of your refund each year.
Premium Tax Credit
If you signed up for health insurance through the exchanges, you may qualify for the premium tax credit. This credit can go directly to your health insurance company to reduce your monthly premiums, or you can elect to receive it when you file your federal income tax return. When you signed up for health insurance, you determined how you wanted to receive the credit. If you get insurance through your employer, you will not qualify for the credit.
For more tips about filing taxes, contact a company like Capital Accounting And Tax Service Inc.