What are the Best Tax Credits for 2021, 2022?

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1. Tax credit for earned income

The earned income tax credit helps people with lower earnings pay less in taxes. Typically, the IRS contacts families that may qualify for the EIC; however, if you have not been contacted and want to determine your eligibility, you may utilize the EITC Assistant.

2. Credit for lifelong learning

Other applicants for higher education may also claim the lifetime learning credit. To be eligible, you, your spouse, or a dependent must bear the expense of qualified higher education. You may claim the entire credit if your modified adjusted gross income, or MAGI, is less than $58,000 or a partial credit if it is less than $68,000 for the current tax year.

3. Credit for American opportunity

The AOTC is only available to first-time college students during their first four years of college or other post-secondary study; it is not available in conjunction with the lifelong learning credit. If you are seeking a degree and have not been convicted of a felony drug offense, you may apply. To qualify for the American Opportunity Credit, your modified adjusted gross income, or AGI, cannot exceed $80,000 per year. (You may still qualify for a partial credit if your yearly income is between $80,000 and $90,000).

4. Credit for child and dependent care

If you provide care for a child or another dependent in your family, you may claim a child care credit of up to $3,000 for one dependent or $6,000 for two or more dependents. You'll need to demonstrate that your costs are directly tied to maintaining the well-being and protection of a child or dependent.

5. The savers credit

If you contribute to an IRA or an employer-sponsored retirement plan, such as a 401(k), you may be eligible for the saver's credit. You must be at least eighteen years old. You are not permitted to be a full-time student. Additionally, you cannot be claimed as a dependent on anybody else's tax return. The credit amount is determined by your adjusted gross income, which must be less than $64,000 if married and filing jointly – or $32,000 if you are a single filer.

6. Tax credit for children

The child tax credit may provide you with up to $2,000 in tax savings for each qualified kid. Each kid must be 17 years old or younger and be listed on your tax return as a dependent. Dependents include the following:

Stepchild Foster child

Step-sibling

Half-sibling

Grandchild

Niece/nephew

Child who has been adopted

Continue reading: How to Estimate Your Tax Refund in 2021

7. Tax credit for adoption

Additionally, there are rewards available for adoption-related expenditures. The adoption tax credit reimburses adoption fees, court costs, attorney fees, travel expenses, and other adoption-related expenditures. As of 2018, the maximum amount per kid is $13,810.

8. Health and dental care expenditures

Even with insurance, medical bills may have to be paid out of pocket. You may deduct medical costs for yourself, your spouse, or any of your dependents if the total exceeds 7.5 percent of your adjusted gross income. Among the possible expenditures are the following:

Fees charged by physicians, dentists, specialists, mental health providers, and even non-traditional physicians.

Hospital care, nursing home care, and acupuncture treatments are all available.

Alcohol and drug addiction treatment, smoking cessation programs, and prescription medications for nicotine withdrawal and other addiction-related requirements.

Insulin, spectacles, contact lenses, hearing aids, crutches, wheelchairs, guide dogs, and other support animals are all covered.

Funeral expenses, non-prescription drugs, and the majority of cosmetic surgeries are not tax deductible.

9. Credit for residential energy use

You may be eligible for a residential energy credit if you are an energy-efficient homeowner. The following are included in the credit:

New windows and doors that are energy efficient

Insulation of Roofs

Heating and cooling systems that are energy efficient

Heating systems for water

Stoves made of biomass

Solar electric properties and solar water heaters that meet the criteria

Thousands of electric vehicle tax credits were inappropriately distributed, an audit reveals.

10. Student loan tax deduction

While repaying student loans might be scary and costly, you can benefit from the student loan interest deduction at tax time.

You may be eligible for the tax credit if you paid interest on a qualified student loan for yourself, your spouse, or another dependent. The deduction may be claimed as an adjustment to income rather than as an itemized deduction. You may deduct either $2,500 or the amount of interest you actually paid over the year, whichever is less.