Is the IRS all bad? The IRS is not all about seizing assets, bank accounts, and wages. The IRS does provide ways to reduce your actual taxes through Tax Credits. What makes a credit different from a deduction? A credit lowers your actual amount of taxes. A deduction lowers your actual taxable income.
Help for those who need it…So what kinds of tax credits are there, and how can I get them?
Most tax credits are dependent on your income. The majority of them do require that you be in a lower income bracket, so check with the IRS at irs.gov to see if you can qualify.
Some of the tax credits that you may qualify for are listed below. This is not a complete list, but it should give you an idea of what’s okay and what isn’t:
Child tax credit: You can receive a $1,000 tax credit for each child that is eligible as dependents. Be careful with this one, as claiming a child incorrectly can cause you to be in debt to the IRS.
Education credit: This is available to full and part time students. So whether you’re a twenty-something going full time or if you’re a returning student looking to improve your career options you can claim your schooling. You can claim up to $1,650 as a credit for your schooling for the year. Usually your school will send you a tax statement.
Home Energy Efficiency Credit: If you’ve made changes to your home to make it more energy efficient you can claim up to $500 as a credit. Keep your receipts so you can prove you made the improvements. Not only do you save on utility bills, but you get back money for the government.
Be certain…Tax credits can provide you with a much needed shot in the arm as they can greatly increase your income tax return. But beware, and make sure you know and follow the guidelines set by the IRS before you claim anything as a credit.
These same credits can backfire on you as the IRS frequently audits larger tax returns. You could find yourself owing the IRS if you incorrectly claimed a tax credit, or claimed something you shouldn’t have.
If you’re not sure about a tax credit feel free to drop your friendly former IRS-Hitman an e-mail.
Now you have the smoking gun…Use it!
