Jan 3rd 2008, 18:14

Claim Your Credits This Tax Season

Save money to pay for major expenses

It's tax filing season once more, and the IRS has started mailing tax packages to millions of taxpayers. When you receive yours, remember that you could qualify for one or more tax credits, so review your records carefully.

A lot of taxpayers are eligible for tax credits each year, but many are unaware of this fact or take it for granted. Well, don't.

Tax credits save you money either by increasing your refund or by lowering the amount of tax that you pay for certain expenses, such as the costs involved in raising your family, paying for college tuition, making your home more energy efficient, paying for daycare services, and saving up for your retirement.

Some credits (such as the EITC, saver's credit, education credits and child tax credit) have income restrictions, but others are available to people at all income levels. Take advantage of any of these tax credits that could be available to you:

Earned Income Tax Credit (EITC)
If you are a worker or if you belong to a working family that is considered low- or moderate-income (under $14,590 for childless workers and below $39,783 for working families), you may qualify for this tax credit. In general, you are required to have earned income as an employee, independent contractor, farmer or business owner; however, if you are a disability retiree you may also qualify.

The EITC Assistant on the IRS website can help you find out if you qualify for this tax credit. This IRS free service will be available in mid-January.

Child Tax Credit
This tax credit (not to be confused with the child care credit) is given to taxpayers who have a dependent child under age. You can get as much as $1,000 per eligible child on top of the regular $3,400 exemption you can claim for each dependent.

Check out the IRS Publication 972 to learn more about figuring and claiming the child tax credit.

Credit for Child and Dependent Care Expenses
Taxpayers who pay for child and dependent care so they can work or look for work may qualify for this credit. This tax credit is not limited to paying for day care for child dependents under age 13; it also applies to paid care for a spouse or other dependents who are unable to care for themselves, regardless of their age.

When filing for this tax credit, you may need to enter on your return the care provider's social security number or taxpayer identification number.

To claim this credit, use Form 2441 (for Form 1040 filers) or Schedule 2 (for Form 1040A filers).

Education Credits
These are tax breaks to help parents and students pay for post-secondary education. You can claim credits for tuition and required enrollment fees paid for your own and your dependents' college education.

The Hope credit is available for two years of post-secondary education to eligible students who must be enrolled at least half time. On the other hand, the lifetime learning credit can be claimed even by those only taking one course.

Another option is to take tuition and fees deduction instead of credits. However, you cannot claim both an education credit and the tuition and fees deduction for the same student in the same year. Rules and income limits apply to each of these tax breaks.

To claim education credits, use Form 8863. More information on education credits and other education-related tax breaks are available on Publication 970.

Saver's Credit
Also known as the retirement savings contributions credit, this tax credit is for eligible low-and moderate-income workers who are saving for retirement. Those who contribute to an IRA or workplace retirement plan (such as a 401(k)) and those with income below the limits set by the government may qualify. for 2007 are $26,000 for singles and married filing separately, $39,000 for heads of household and $52,000 for joint filers.

The saver's credit can be claimed in addition to any other tax credits available to you. A tip from the IRS: 2007 IRA contributions can be made until April 15, 2008, so there's enough time for you to make IRA payments and still get the saver's credit on your 2007 return.

To claim the saver's credit, use Form 8880.

Energy-Saving Tax Credits
You can claim tax credits for making certain energy-saving improvements for your main home. These include new energy-efficient upgrades for your home insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers.

The amount of tax credit you can get is limited to $500, however. Other limits apply as well. On a different note, if you spend on photovoltaic property, solar water heating property and fuel cell property, you can get 30 percent credit.

Use Form 5695 to claim these credits.

If you need more information or assistance concerning these credits, consult the instruction booklets that come with your tax package. You can also call the IRS toll-free customer service number at 1-800-829-1040 (for individual tax issues) or 1-800-829-4933 (for business-related tax issues). If you're a TTY/TDD user, call 1-800-829-4059 to ask tax questions or to order forms and publications.

 

To Do List: - Suggested Links:

1. Increase Your Income:
   Get an online degree with financial aid from the government.
2. Consolidate Your Bills:
   Student Loans - Credit Card Debts - Refinance Home
3. Reward Yourself:
   Get a new computer for free.
4. Get some cash you don’t have to pay back:
   Government has money for almost any worthwhile need.
5. A MasterCard or Visa, even if your credit is not good
   A real line of credit