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Date Created: 12/21/15
Family Tax Credits and Deductions for 2014 Learning the ins and outs of the tax credits and deductions you are eligible for can get a bit confusing. By understanding the difference between a tax credit and deduction you may be able to adjust your tax bracket, increase your annual refund, or reduce the amount you owe. Below is a closer look at the difference between tax deductions and credits. Tax Credits Tax credits are dollar-for-dollar amounts that you can deduct from the taxes you owe. Tax credits are further broken down into 2 categories—refundable and non-refundable. A non-refundable tax credit may decrease or potentially eliminate the amount of taxes you owe, but if the sum of your tax credit leaves you paying more than you owed you will not be eligible for a tax refund of the amount you have overpaid. However a refundable credit it is just the opposite and if your credits leave you paying more than you owed your overpayment will be returned. The most common tax breaks for families are Earned Income Credit, Child Tax Credit, and Child and Dependent Care Credit. Here is a brief explanation of each: • Earned Income Credit: This amount is determined by your income and number of qualified dependants. This can result in a large credit for you and your family. For example in 2012 a family of 3 qualified dependants received a credit of over $5,800. • Child Tax Credit: This credit is for parents in qualifying tax brackets but can result in an additional $1,000 annually for each qualified dependents. • Child and Dependent Care Credit: If you incur child care expenses for your dependants under the age of 13 you may be eligible to receive credit for up to 35% of your child care expenses while you are in school or at work. This credit has a maximum of $3,000 for 1 qualified dependent and $6,000 for 2 or more. • Adoption Credit: If you adopted a child during the tax year you may be eligible for a credit of up to $12,650. Tax Deductions A tax deduction is an amount that can be applied to your annual earnings that may place you in a lower tax bracket. A few deductions that can lower your tax table bracket and annual earnings are below. • Exemptions for Dependents: If you have a qualified dependant you may be eligible for an exemption of $3,800 with your taxes. You must be able to provide a valid social security number for any qualified dependants for this exemption. • IRA Deductions: Each year the amount of this deduction varies but you may deduct some of your IRA contributions. For example in 2012 you were able to deduct up to $5,000. • Charitable contributions: When you make donations to any charitable organizations you may save the receipts and records of your donation to deduct from your annual earnings. This can include cash donations or donations of supplies you purchased or donated to help a non-profit organization? • Personal Property Taxes: Most fees that you pay for local and state property tax can be deducted from your annual earnings. If you need assistance determining which credits and deductions you are eligible for? The best bet is to visit TurboTax online to get the very latest tax information. You may also like to use their free tax refund calculator while you’re there.
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