Are you eligible for any of these 2010 tax credits?
The IRS strongly urges that “Taxpayers should consider claiming all the tax credits for which they might be eligible when completing their federal income 2010 tax returns”.
What is a Tax Credit?
A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are Refundable, that is your personal income taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes. Other Tax Credits are Non-Refundable, that is if would not be allowed if the taxpayer has no tax personal tax liability. Thus, the Refundable tax credits are more preferable.
Here are some of the more important 6 tax credits taxpayers could be eligible to claim on their 2010 tax returns. The IRS urges all taxpayers to consider these tax credits when filing their 2010 tax returns.
1.Child Tax Credit This credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses.
2.Earned Income Tax Credit
This is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
3.Child and Dependent Care Credit
This is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. There is a maximum limit to the amount of qualifying expenses. The credit is a percentage of those qualifying expenses. The child and dependent care tax credit is worth 20% to 35% of your day care expenses. The percentage of the credit depends on the taxpayers adjusted gross income
4.Credit for the Elderly and Disabled
This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are either citizens or residents. However, there are income limitations that are applicable against this tax credit.
There are two credits available, the Hope Credit and the Lifetime Learning Credit, for people who pay higher education costs. The Hope Credit is for the payment of the first two years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year.
6.Retirement Savings Contribution Credit
Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions to a traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount.