The IRS is reminding everyone not to overlook credits that can reduce their tax bill.
“A tax credit is a dollar-for-dollar reduction of taxes owed,” said IRS Spokesman Michael Devine. “Some credits are refundable, which can mean a refund rather than owing any taxes.”
Here are some of the credits he said should not be overlooked.
The Earned Income Tax Credit is a refundable credit for workers who earned income less than $48,362 from wages, self-employment or farming last year. Income, age and the number of qualifying children determine the amount of the credit that can be as much as $5,666.
The Child and Dependent Care Credit is for expenses paid to care for qualifying children under age 13 or for a disabled spouse or dependent, so you can work or look for work. Expenses up to $3,000 for one or $6,000 for two or more qualifying individuals can be included.
The Child Tax Credit is for people who had a qualifying child under age 17 at the end of 2010. The maximum amount of the credit is $1,000 for each qualifying child. It can be claimed in addition to the Child and Dependent Care Credit.
The American Opportunity Tax Credit can be worth up to $2,500 per eligible student enrolled in a program that leads to a degree, certificate, or other recognized educational credential. The credit is for the first $2,000 of tuition and related expenses (including books) and 25 percent of the next $2,000 of tuition and related expenses paid during the taxable year.
The Lifetime Learning Credit may be as much as $2,000 for qualified expenses for graduate-level degree work. It is not based on the student’s workload and there is no limit to the number of years in which the Credit may be claimed, provided the individual meets the eligibility requirements.
The Making Work Pay Credit can be worth up to $400 for individuals and $800 for married taxpayers filing a joint return. Most workers have already received the benefit of the credit because their federal income tax withholding was reduced in 2009 and 2010. Because the amount of tax withheld was reduced, not claiming the credit on your 2010 tax return could result in a smaller refund or in some cases, a small balance due. Those filing a Form 1040 or 1040A will use Schedule M.
Energy efficient home improvements made in 2009 and 2010 may be eligible for a credit up to $1,500. For businesses and individuals buying electric vehicles, credits can be as much as $7,500.
These and other credits are available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should visit the IRS website at www.irs.gov<http://www.irs.gov/> for more information.