Personal tax credits are reductions in federal and state taxes available to those who qualify for them.
What Types of Personal Tax Credits Are Available?
The following list just a few of the major personal tax credits available out there:
- Child tax credit
- Child care credit
- Earned income credit
- Adoption credit
- Health coverage tax credit
- Welfare to work tax credit
What Is a Child Tax Credit?
A child tax credit is where you can claim a $1,000 child tax credit for every qualifying child under the age of 17. This credit is eliminated if your adjusted gross income is above $110,000 if you are married filing jointly or $75,000 if you are filing single however.
What Is a Child Care Credit?
A child care credit is a credit you get when you hire someone to look out for your child or dependent. To qualify, you have to incur the care expenses while earning an income, you must pay for at least 50 percent of the costs of the dependent, you must file jointly if you are married, you must hire someone other than your child who is older than 19, and you must report the identifying information of your caretaker. The credit depends on your income and only applies to the first $3,000 spent for one child, or $6,000 for two or more children.
What Is an Earned Income Credit?
An earned income credit is a credit that can be claimed by workers with qualifying children who meet certain income requirements. The EIC can be up to $2,574 for one child, and $4,205 if you have more than one child. To qualify, you must have an adjusted gross income of under $29,666, or $30,666 if married filing jointly if you have one qualifying child, or $33,692, or $34,693 if married filing jointly, if you have more than one child. The child had to live with you more than six months during the year, you must file a joint return if you are married to qualify, and you are not a qualifying child of another person.
What Is an Adoption Credit?
An adoption credit is a credit you may be able to receive an adoption credit of up to $10,160 for the costs of adopting a child under 18, or a mentally or physically disabled person. To claim the credit, you must fill out Form 8839, and the adoption had to be finalized by the end of the year. Adoption fees that can be deducted include adoption fees, court costs, attorney fees, and travel expenses.
What Is a Health Coverage Tax Credit?
The Health Coverage Tax Credit (HCTC) is a program that can help pay for nearly two-thirds of eligible individuals' health plan premiums. To be eligible, taxpayers must be enrolled in a qualified health plan, which includes COBRA, state-qualified health plans, or if the taxpayer is enrolled under a spouse's work plan and pays more than 50 percent of the total health care costs.
What Is the Welfare-to-Work Tax Credit?
The Welfare-to-Work Tax Credit is a federal income tax credit that encourages employers to hire long-term family assistance recipients who begin to work any time after December 31, 1997, and before January 2004. This tax credit can reduce employers' federal tax liability by as much as $8,500 per new hire.