A couple of weeks ago I wrote about tax credits for parents. Some of my childless readers wanted to know what kind of credits were available to those without kids. Ask and ye shall receive! Here are 5 tax credits for everybody. Meaning that you don’t have to have kids to qualify for them, but you do have to meet the specific eligibility requirements for each one.
1. Retirement Savings Contributions Credit
This one is also known as the Saver’s Credit. If you contribute some of your earnings to a retirement account, you can deduct up to $1,000 ($2,000 for married couples) to lower your tax liability. This is in addition to the tax benefits you get on the front end with accounts such as a 401k, or on the back end with accounts like a Roth IRA. Income limits on this one are $60,000 for married couples, $45,000 for those filing as Head of Household, and $30,000 for those filing as single, qualifying widow, or married filing separately. Your income will effect how much of the credit you qualify for. To see which retirement account contributions count, along with other information, check out page 47 of this IRS document.
2. The Earned Income Credit
This credit is more lucrative if you have kids. But you can still qualify for it if you don’t, the income limits are just lower. Before anyone goes off in the comments about how it’s extended welfare and it’s not right that we pay it to lower-income people and blah, blah, blah, please read this article to learn more about the actual reason for this credit.
If you’re single, head of household, or a qualifying widower, this is only going to work for you with an income up to $14,550. (Though if you’re close, use the worksheet on page 52 of the 1040 instructions to triple check.)
For married people with no children, the benefits end at an income of $20,000, with the same caveat to triple check through the worksheet if you’re close.
If you do have kids, you max out at $46,950 if you’re not married or filing jointly, and $52,427 if you are married with kids.
There’s a lot of variables that go into this, so make sure to fill out the worksheets. It’s a little bit of work, but depending on where your income falls it could be worth a lot of money back as it’s a refundable credit.
3. The Premium Tax Credit
This is a new one this year, brought to you courtesy of the Affordable Care Act. When you applied for health insurance, you probably remember that if your income fell within a certain amount, you qualified for subsidies that would bring your monthly premium down. You can either use those immediately or pay full price and take the premium tax credit at the end of the year for the same amount. This tax credit is refundable, meaning that if your tax liability is zero, you will get the remaining balance of it back.
Here’s the problem with taking those subsidies right away: if your income increased the slightest bit throughout the year, that’s going to lower the amount of subsidies your qualify for. Every time this happens, you’re supposed to report it. I’m guessing a lot of people didn’t. Now, instead of getting money back, they’ll end up owing for the subsidies they disqualified themselves for when they started making more money.
Now that I know, I’d rather pay the full premium if at all humanly possible, and then get a refund next tax season. It’s a lot less paperwork, especially if you’ve got a variable income. It also lowers the chances that you’ll screw up your calculations and end up owing money back to the system next April 15.
Find out more about The Premium Tax Credit via the IRS.
4. Homeowner’s Litany of Tax Credits
I’ve never owned a home, so I can’t give you too many insiders tips on these, other than the fact that there’s a litany of them. Pay interest on your mortgage? That’s deductible up to a certain mortgage amount. Refinanced your home? Same deal. Pay mortgage insurance premiums? There’s a deduction for that. There’s even one for making energy efficient upgrades. To learn about all the different ways to reduce what you owe because of what you’ve paid for your home, check out this IRS resource.
5. The Lifetime Learning Credit
Last time, we talked about credits parents could claim for paying for college. Students can claim those, too, especially if their parents can’t claim them as a dependent. Non-traditional students should look into either the American Opportunity Credit, Tuition and Fees Deductions, and, finally the Lifetime Learning Credit.
The reason I want to feature the Lifetime Learning Credit is that you don’t even have to be a college student at all to claim it. You can reduce your tax towards zero if you’ve taken any courses at a post-secondary school, even if it was just to further or improve your career. If your employer paid for the course, chances are you’re out of luck on this one, but if the money to pay the bill came out of your pocket, your continuing education just reduced your tax liability.
Happy tax season, everyone! Please remember that I’m not a tax professional. Just a tax enthusiast who has used a number of these credits before. Research each of these and work out your own numbers before you apply them, and if you find yourself confused or stuck, get some help. From a tax professional.