Tax Credits - Part 1

Tax credits are actually worth more to you that a deduction. A deduction is something you subtract from your gross income. A tax credit reduces the amount of taxes you owe, dollar for dollar.

But what the government grivet, it often just dangles in front of our noses. There are income limits associated with these credits. If your income is too high, you can't use the credit.

Child Tax Credit

Next we have the child tax credit, whish is available for children being supported by you if they are under age 17. The credit begins to phase out if your income as a single parent is over $75,000, married filing jointly $110,000, and married filing separately $55,000. The credit is reduced by $50 for every $1,000 of income over the threshold income limit.

Dependent and Childcare Credit

The dependent and childcare credit is available if you work outside your home or are a full-time student. The expenses must be for ....

A dependent under age 13

Any person who is physically or mentally incapable of caring for themselves and they must qualify as your dependent.

A spouse who is incapable of self-care

The maximum amount of expenses that the credit can be applied to is $2,400 if there is one qualifying child or dependent and up to $4,800 if two or more dependents are being card for. If you income is under $10,000, you can deduct 30 percent; if it is over $10,000, it is modified by one percentage point for each $2,000 of income. For taxpayers of incomes over $28,000, the credit is 20 percent.

Now, if you find that confusing, you are not alone! Our tax code is baffling because there are so many nuances within each code section. The government really needs to address this area because it hasn't been updated in years; although childcare costs have escalated, the credit has remained the same. You need a math degree to file your own taxes these days.