Finding Tax Credits
Where do I find Tax Credits?
Interpreting the Tax Code
Information on tax credits are not readily available to the average taxpayer like some of us whose routine may be as predictable as this: wake up, bathe, breakfast (sometimes skip breakfast), dress, go to work, have lunch, go back to work, go home, watch TV, have dinner, sleep, wake up… yep, sounds a little depressing but that is another story.
Yes it is really true, paying taxes are probably the last thing to remember since the accountants at the company where we worked do all the tax filing stuff. If paying taxes could be the least possible thing to remember, how about the tax credits? It might be the next least possible thing to put into consideration. Sad, since claiming tax credits is the most important step we must take in order to reduce our taxes.
Keep in mind that a wealth of tax deductions and credits are available for both middle and lower income taxpayers. Although rebates may vary from state to state. More commonly, if not more talked about is the child tax credit.
Scenario: Since, technically speaking, there is no limit to how many children one may apply for tax credit qualification, and since, if the taxpayer maximizes his using child tax credit that his federal income tax obligation equals to zero, receiving refunds subsequently, then it is just practical to encourage every taxpayer to search for ways on how to get the most out of tax credits.
Now it is crucial to understand the difference between a tax deduction and tax credit since both sounds like they are family. Tax deduction which is the reduction of the taxable income is a whole lot different to a tax credit which is the amount that a taxpayer may reduce from the very amount of taxes he must pay. Income tax, business tax, or VAT are examples where a tax credit may be granted. It is said to be very powerful that they tend to be available only in specific circumstances. And some could only apply for one year (although, it is renewable yearly).
One may acquire credits from the following scopes: Individual income tax, Business tax, and VAT – all three are the most common places where taxpayers can utilize tax credits to a maximum. Read more to find out about the tax credits we may qualify for and see what is available to you in your area.
Individual income tax credits
In the United Kingdom for example, if the taxpayer is responsible of at least one child, he may be eligible to apply for Child Tax Credit. If he works yet his income is just a little over the minimum, he may apply for the Working Tax Credit. Still it is possible to apply for both since low income generators are subsidized by the British government.
In the United States, low income subsidies include earned income credit, credit for the disabled and the elderly, retirement savings credit, and mortgage interest credit. Several income tax systems provide income subsidies to individuals who were classified as low income earners. These credits may be based on income, family status, work status, or other factors. Often these are refundable when total credits go more than the tax obligations.
Family relief program
While there are many families who can support their children through college, buy modest homes, provide tidy clothes, and acquire properties, there are still many families whose heads receive less than the minimum wage (or worse receive none at all). The question would now be: how can these families support its own? The Family relief program may now come in. Tax credits can be allowed to low income couples who have qualified children. And aside from the tax deduction for each dependent child, tax credits may be granted also on a per child basis. Happily, there is no limit to the number of children one may apply credits for. And as mentioned previously, if the taxpaying parent/s utilizes the child tax credits to a maximum level where credits exceed federal liabilities (which by the way is the sum the taxpayer pays the government to support federal programs to include government salaries, defense, education, roads, and more) they get reimbursements too.
It is still possible to apply for this program even if the qualified child is not living with the taxpayer (i.e. The child lives with the former spouse/ partner); and if the child is adopted.
Business tax credit
Business tax credits carry investment, work opportunity, welfare-to-work, alcohol fuels, research and experimentation, low-income housing, enhanced oil recovery and several other credits. These credits can be subtracted from the tax. The government usually makes use of tax credits as a policy tool to influence business and public behavior.
In the US, business credits are made available to both individuals and businesses. This constitutes the following:
Alternative motor vehicle credit – one may be eligible to apply for this type of credit for the acquisition of vehicles not powered by gasoline after January 1 2006.
Alternative fuel credit – the tax system, in its effort to promote the program on “The Greener Earth,” wrote the tax law granting credit based on the production/ usage of non – petroleum fuels.
Disaster relief credit – Although paying taxes might be the last thing a disaster victim will think about, still tax laws extend help through credits and provides welcome ease to the victims who were already burdened with the loss of property, and even not uncommonly, life.
Credits for employing individuals in certain groups - This is made available to employers who hire people previously dependent on welfare. Another example is when President Barrack Obama provided tax credits for companies who employ veterans (who were jobless for more than two weeks) before December 2012.
Increasing research expenses credit – for any individual, estate, trust, corporation incurring expenses for qualified research, which research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer.
Federal investment Tax credits – Tax credits, having a number of classes, commissioned incentives under the Tax Code to accomplish public policy. Aiming to energize the private sector to cater a public good, the legislative body allows a participating taxpayer a dollar for dollar reduction of their tax obligation for investments in projects that probably would not occur but for the credits.
Homebuyer tax credit -A couple of years ago the Federal Government implemented a first-time homebuyer credit in the hope to alleviate the declining housing market tax credits. Recently the federal government offers tax credits in house wraps when you install your new siding or solar in your home. In this case more and more homeowners are making their homes more energy efficient.
Value Added Tax
Providers must collect Value Added Tax (VAT) in some controls upon billing by customers. While these providers use goods or services provided by others, they may have paid VAT to these providers too. Most VAT systems grant the amount of such VAT paid or considered paid to be used to balance VAT payments due, generally referred to as an input credit. Some systems allow the excess of input credits over VAT liabilities to be refunded after a period of time.
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