It also explains how to decrease the amount of tax that you must pay. Tax credits are a dollar-for-dollar reduction of tax obligations. These credits are available to taxpayers who have low incomes and middle-class taxpayers. However, you will be required to meet certain criteria to qualify to claim them. Tax credits are available in the form of refunds when you file tax return. They can be utilized to pay for expenses when you’re at work, learning or caring for your children.

TheSavers Credit assists in reducing your tax liability if make a contribution to any retirement account, like a 401(k) scheme or an Individual Retirement Account (IRA). Earned income tax credits (EITC) that is essential to fighting poverty, encourages hard work and can help reduce federal taxes for families with lower incomes. EITC promotes working and lowers poverty in families that have children.

The American Opportunity Tax Credit (AOTC) tax credit is refundable for up to $2,500 per year for students in college. Taxpayers who are paying to attend college can claim this tax deduction. They’re geared towards academics and can only apply to the cost of tuition, fees and other course material required for the enrollment process or participation at an eligible educational institution. It is possible to claim AOTC during the initial four years postsecondary in an accredited institution of higher education. zn236pm5se.