As the 2023 tax season is upon, it’s important to be aware of the various tax credits that may be available to individual taxpayers. Tax credits are valuable, as they can directly reduce the amount of taxes owed, dollar-for-dollar.
Here are a few tax credits that individual taxpayers should be aware of:
Child Tax Credit
This credit is available to taxpayers who have dependent children under the age of 17. The credit amount is up to $2,000 per child and is partially refundable, meaning that even taxpayers who owe no taxes can receive a portion of the credit as a refund.
Credit for Other Dependents
A $500 nonrefundable credit is available for dependents who are not qualifying children for the Child Tax Credit and each qualifying relative. The same AGI limitations apply to this credit as the Child Tax Credit.
Adoption Credit
A taxpayer can claim a credit for up to $14,890 and also exclude up to $14,890 of employer-provided benefits from income for expenses of adopting an eligible child. The credit is phased out for taxpayers with Modified Adjusted Gross income of more than $263,410.
Credit for the Elderly or the Disabled
Taxpayers age 65 or old and taxpayers under 65 who retired on permanent or total disability and receive taxable disability income, may qualify for a credit. A taxpayer is eligible for the credit if their Adjusted Gross Income and nontaxable pensions, annuities, or disability income are less than $17,500 (Single).
Retirement Savers Credit
This credit is available to taxpayers who contribute to a qualified retirement plan, such as an IRA or 401(k). The credit can be worth up to $1,000 for individuals and $2,000 for married couples, depending on your income and contributions.
American Opportunity Tax Credit (AOTC)
This credit is available to taxpayers who are paying for higher education expenses for themselves or a dependent. The credit is worth up to $2,500 per eligible student and can be claimed for the first four years of post-secondary education. Income limits apply and the tax credit is phased out for taxpayers with AGI between $80,000 and $90,000 Single ($160,000 and $180,000 Married filing jointly).
Energy Home Improvement Credit
This credit applies to existing main homes for exterior doors, windows, insulation, heating, air conditioning, and water heaters. A total lifetime credit limit of $500 applies in 2022 and the credit varies based on the property installed.
Residential Clean Energy Credit
This credit applies to solar and wind power property, geothermal heat pumps, biomass fuel property, and fuel cell property. The credit is available for existing homes and homes being constructed. The credit rate is 30% of the cost of eligible property with certain applicable limitations.
It’s important to note that these are just a few examples of the tax credits available to individual taxpayers. Eligibility for these credits and the credit amounts can vary based on income, filing status, and other factors. Be sure to consult with a tax professional or review the IRS guidelines to determine if you qualify for these or any other tax credits.
If you have questions about how this topic will impact you, Team LittleOwl CPA is here to help. Schedule a discovery call today!
About Tabitha Regan
Tabitha Regan is the Founder and CEO of LittleOwl CPA. She is a Certified Public Accountant, Certified Financial Planner™ and Personal Financial Specialist. In her 16+ year career span, she has developed an expertise in the specific needs of small businesses and busy professionals with accounting, tax and advisory services.
