Nobody likes to pay taxes. In fact, most people prefer to get a little something back from the IRS after filing a federal tax return.
Even though it’s more prudent, financially speaking, to break even – or have to write the IRS a small check – I recognize that lots of Americans love the idea of getting a juicy check from the government during tax season.
No wonder, then, that as of March 2011, the IRS says the average tax refund check now tops $3,100.
One way to get the government to send you a juicy check like that is to claim tax credits.
A tax credit reduces the taxes you owe dollar for dollar. What’s even better is that some tax credits are refundable, meaning you get that sought-after check back from the feds.
If you’re looking to fatten your bank account, the IRS wants you know about the following four tax credits that you should consider claiming (if you’re eligible, of course):
The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming.
Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work.
For more information, see IRS Publication 503, Child and Dependent Care Expenses.
The Child Tax 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. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement.
You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan.
The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).
This is just a sampling of federal tax credits. Lots of other ones exist too, and each one is subject to its own qualifications, limitations and rules.
But the point is this: if you legitimately qualify for a tax credit, do go ahead and claim it. The refund you could get will make your time and effort worthwhile.