Don’t Miss Any of These Money-Saving Tax Credits

Alden Wicker
Posted

Want to pay less in taxes?

Unless you’re Warren Buffet, the answer is probably, “Yes!”

There are several ways to (legally) pay less in taxes. There are deductions, exemptions, and—what we’ll talk about in this post—credits.

Unlike deductions and exemptions, which lower the amount of income you are taxed on, credits directly reduce the amount of taxes you owe. So if you receive a $1,000 credit, that means you will pay $1,000 less in taxes. Sweet and simple, right?

Read on to find out if you can claim any of the most commonly claimed credits.

If You Have a Low Income …

You could claim the Earned Income Credit. This credit, worth up to $5,891, applies to people whose earned income and Adjusted Gross Income (which we show you how to find here) fall below a certain threshold. Unlike most credits, the EIC is refundable. That means when the EIC you qualify for exceeds the amount of taxes you owe, you get a refund. Look at the chart below to see which category applies to you. If your income is less than the number listed, you may qualify.

SingleMarried Filing Jointly
3+ Children$45,060$50,270
2 Children$41,952$47,162
1 Child$36,920$42,130
No Children$13,980$19,190

If you plan to claim this credit, you will need all the information listed here, such as last year’s federal and state income tax statements, all your income statements for the current filing year and information on caretakers of any dependent children.

energy efficient home improvementsIf You Made Energy-Efficiency Improvements to Your Home …

If you lowered your energy bills by sealing up your home, you get even more money from the IRS! The Nonbusiness Energy Property Credit is for homeowners who made energy-efficient improvements such as insulation, new windows and furnaces. For 2012, you can get  a credit worth 10% of the cost of the qualified efficiency improvements you made. You can claim up to $500 over your lifetime.

What if your electricity comes from your own green sources? You should check out the Residential Energy Efficient Property Credit. This credit gives homeowners 30% of what they spend on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. No cap exists on the amount of credit, except for fuel cell property.

If in this coming year you decide you want to go green for your home, the IRS suggests that you check with the manufacture’s tax credit certification before you purchase. This can normally be found on the packaging or the company’s website. Full details are available on Form 5695.

If You Bought a Plug-In Electric Car …

You could claim the Plug-In Electric Vehicle Credit of up to $7,500. You qualify if you purchased a plug-in electric vehicle or conversion kit in 2012 and meet the very specific requirements for what kinds of cars qualify. Read more on the IRS website.