If you don’t know much about tax credits or how they work, you might be missing out on some of the benefits of the most popular tax credits out there! You want to know as much about tax credits as you possibly can so that you save yourself as much money as possible. If you find out you qualify for some of the most popular tax credits, you should review them closely to make you’re maximizing them to the fullest extent. To save you some legwork, we’re bringing you the most popular tax credits that people take advantage of to lower their tax bills.
Credit for Retirement Savings:
The retirement contributions credit was taken by more than almost 7 million taxpayers. It matches up to half of the initial $2,000 that a single filer contributes to their IRA or 401k retirement plan through their employer. Joint filers can have up to 50% of the first $4,000 matched. On average, it only saved taxpayers about $1.2 billion–which is somewhat low–which equals out to around $175 per taxpayer. This credit is exclusively for those taxpayers that file solo that make under $30,000 and those joint filers that make less $60,000. Those solo filers that make less than $18,000 and joint filers that make $36,000 are of an even higher percentage of taxpayers that qualify for this credit. The credit exists to encourage taxpayers to save more money. If you make the conscious decision to put money into your retirement savings, you can be very handsomely rewarded when tax time rolls around and that’s the reason why this is one of the most popular tax credits.
Offshore Tax Credit:
The offshore tax allowance was claimed by more than 7 million tax filers. There’s only a few more people that sprung for the foreign tax credit than those that sprung for the retirement allowance, but the foreign tax credit saved taxpayers a lot more in the end: close to $19.2 billion. The offshore tax allowance exists to avoid taxing incomes twice that are earned in another country. International investments are the most common types of situations that fall under the foreign tax credit. The brokers managing these accounts most usually hold back offshore taxes right away. If you’ve only ever dealt with international investments through mutual funds, you might have the possibility of taking a complete credit against your home country taxes for any of the offshore taxes you’re made to pay. This particular credit can get very tricky, so the help of a thorough tax assistant would be paramount to get the most of the benefit. This is definitely one of the most popular tax credits there is currently.
There were upwards of 10 million tax filers that got in on the benefits that seek to help out those students struggling to handle their college and additional expenses tied to their educational needs. Most of the people that took credits for educational purposes went for the U.S. Opportunity Tax Credit. It’s valid for the first four years of your higher education career and can reduce your tax bill by as much as $2,500. You can even get some of your U.S. Opportunity Tax Credit in your refund check even if you didn’t have enough tax allowance to apply against it. You combine these benefits with the benefit of the Lifetime Learning Credit which pays about 20% of up to $10,000 in yearly educational expenses. These costs can be applied from a variant range of learning institutions including training classes and graduate school. Taxpayers got more than $19 billion from this–one of the most popular tax credits–and more than almost $9 billion of that was refundable. It’s no surprise that these funds make a big difference for those families that are trying to make sure they can send their children away to college.
Child Tax Credits:
The child tax credit remains one of the most popular tax credits there is. Families are benefitted for having children and almost 30 million taxpayers take advantage of it. 20 and a half million people also take advantage of the other child tax credit and both of these combined equal more than $55 billion for taxpayers. The base child tax credit rewards a taxpayer with up to $1,000 for children under the age of 17 that qualify.
Earned Income Tax Credit:
The income tax credit is the most popular one there is. It made an appearance on almost 28 million returns total. Americans realize how important it is for them during tax season and equaled out more than a trillion dollars: that’s almost $4,000 dollars per taxpayer that claims it.