Refund checks are what make tax time exciting! If your refund wasn’t quite what you were expecting this year, you may be able to utilize some tax credits next year. We’ve outlined a few areas that you can focus on to boost your refund, or decrease your tax liability for 2016.
- American Opportunity Tax Credit: If you’re an undergraduate in your first four years of post-secondary education, you can utilize this educational tax break. This refundable tax credit can reduce taxable income by up to $2,500 for tuition, fees and course materials.
- Lifetime Learning Credit: The Lifetime Learning Credit is a tax credit available if you, your spouse, or your dependents are enrolled in college classes at an eligible educational institution. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits.
- Savers Tax Credit: If you’re saving for retirement, the Savers Credit provides a credit based on the contribution made to a retirement account for low or medium income earners. This includes contributions to a traditional or Roth IRA, your 401(k), Simple IRA, SARSEP, 403(b), 501(c)(18) or governmental 457(b) plan. The amount of the credit will vary based on the adjusted gross income (AGI) of the individual or household and the size of the contribution.
- Earned Income Tax Credit: The EITC is a refundable federal tax credit that helps reduce the amount you owe based on your income and filing status. It was originally designed for lower-income workers, but now single filers can take advantage of it too. The maximum earned income credit for 2016 is $6,269.
- Child & Dependent Care Tax Credit: The CDCTC is a tax credit for families that pay expenses for the care of children, adult dependents or an incapacitated spouse. You can claim up to $3,000 in dependent care expenses for one child/dependent and $6,000 for two children/dependents per year. Eligible families with an AGI of $15,000 or less can claim 35% of these expenses for a maximum potential credit of $2,100. The percentage of expenses a family can claim steadily decreases as income rises, until families with an AGI of $43,000 or more reach the minimum claim rate of 20%, qualifying for a maximum potential credit of $1,200.
- Charitable Contributions: Not only is charity very important to our communities, it also has a positive impact on your income tax. Donations to a qualified charitable organization may provide you with a substantial credit on your tax return. To claim charitable contributions, you must itemize your deductions and have records of your donations, so keep those receipts! If you sign up for charitable events such as a golf tournament, you can deduct the amount of your entry fee that was a donation. For example, if you donate $100 to play golf in a charity tournament and the green fees are normally $50, you can deduct $50.