All Taxpayers Should Just Love Tax Credits

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Accounting-761599_1920Tax deductions reduce your taxable income and cut your taxes by the amount of your top tax bracket.  For example:  If you make a $100 tax-deductible contribution to the Red Cross for the Oklahoma tornado relief effort(and I hope you did) and you are in the 25 percent tax bracket, the donation will cut your taxes by $25.

Tax credits reduce your taxes by the amount of the credit.  If you work in Mexico and pay taxes there, you may qualify for the Foreign Income Tax Credit in the amount of $500.  If you do qualify, the tax credit will reduce your U.S. taxes by $500.

There are many tax credits that you may qualify for so be sure to talk to your tax advisor.

Credits for families include:

  • Adoption Tax Credit
  • Child Tax Credit
  • Dependent Care Tax Credit
  • Earned Income Tax Credit
  • Elderly and Disabled Tax Credit
  • College Tax Credits
  • Savers Credit
  • Residential Energy Property Credit
  • Health Coverage Tax Credit

Credits for investors:

  • Foreign Tax Credit
  • Low-Income Housing Tax Credit
  • Rehabilitation Credit

General business credits cover a variety of business expenses, including:

  • Alcohol fuels
  • Disability access
  • Employer-provided child care
  • Rehabilitation, energy, and reforestation investments
  • Qualified research credits
  • Small employer pension plan start-up costs
  • Work Opportunity and Welfare-to-Work expenses
  • Small Employer Health Insurance Credit
  • Minimum tax credit