The 5 Smartest Tax Incentives You Can Use Now

Many people think that tax credits and strategies are mainly for the rich. The truth is, nearly everyone can take advantage of the deductions offered, in order to substantially lower your taxes. Many people don't realize how much they're missing out on, so it's important to look into all the possibilities.

Tax Credits

1. Child Care Credit—If you are not taking advantage of this credit, you are really missing out on a substantial refund. For this reason, the child care credit is one of the most popular deductions. Check into this deduction to see if you're missing out on some significant credit.
2. Solar credit—The solar tax credit was first established by the Environmental Protection Agency in 2005. It was set to expire in 2007. However, because it was so popular, Congress has extended that expiration date continuously for over 10 years now. This tax credit has shown to be an extremely influential incentive in ushering the country’s economy into the era of renewable energy.
3. Automotive credit—In order to make renewable energy more sustainable, the government has provided some appealing credits for those who purchased electric or hybrid vehicles. The maximum number a taxpayer can receive is reported to be $7,500, as of fiscal year 2016. In most situations, this represents the maximum limit of credit allowed for using electric vehicles. This can be used to reduce your total bill. So if you owe less than $7,500 at the end of the fiscal year, your whole tax liability is wiped out. You will not be able to use any that is leftover, however.
4. Earned income credit—This is also called a "low-income” credit. This greatly benefits those working less hours, or people who are self-employed. The deductible amount is calculated based on total income, and the number of dependents. The maximum credits allowed are considerable for those with qualifying dependents.
5. Homeowner's credit—First, homeowners can save by upgrading your home's energy efficiency through reduced monthly electric and gas bills. Second, the government helps with an appealing credit. Taxpayers can claim up to 30 percent of their total costs off renewable energy equipment installed at their residences. This can offer amazing value, because there is an unlimited amount to the monetary value of the credit. According to the IRS, “If your credit is more than your tax, you can forward the unused part of this credit to your next year’s tax return. Some examples of energy upgrades for which you may qualify are solar panels, wind turbines, and solar water heaters. It may be a wonderful decision to consider right now to lower your electric bill.

Tax Deductions

There are few things more disappointing than discovering you could have had a substantially higher tax refund, if you had only included more deductions.

Sales tax deductions can save you hundreds of dollars, especially if you made a large purchase during the year.

Health premium insurance deductions can be claimed if they exceed 10 percent of your adjusted gross income.

Other deductions like paying the babysitter, continuing education, or lifelong work, are all deductions that you can claim. If you can claim several at once, it may add up to a substantial overall deduction on your total income.

No matter what deductions or credits you claim, make sure to itemize each one, in order to get the most substantial refund you can acquire. In case you owe money to the IRS, claiming every deduction for which you are eligible can mean the difference between you paying thousands, and paying hardly any at all. It is important to research the tax codes in order to ensure that you are making the best use of the tax rules and laws that govern our tax economy.