As our loved ones head back to school at all levels, it’s hard not to think about money. The cost of supplies, books, tuition, and transportation are among the few (but hefty) costs incurred this time of year by a typical family in the United States. With tax season arriving sooner than not, it’s time to look at how you file so you’re not leaving money on the table that could ease the burden of back-to-school expenses.
1. Take Advantage of the Child Tax Credit
The IRS stipulates that a child under 18 claimed as your dependent on an individual tax return may qualify you for the Child Tax Credit. If your annual income isn’t more than $150K as a married couple, $112K if filed as “head of household,” or $75K as a single filer or married and filing separately, then you meet the eligibility requirements for the Child Tax credit. Some joint returns are accepted for the Child Tax Credit if filed jointly only to claim a refund of withheld income tax or estimated tax paid. For more information, visit the page on the child tax credit at IRS.gov.
2. Be Sure to Claim the Earned Income Tax Credit (EITC) on Your Return
The earned income tax credit not only cuts down on the tax you owe but can also boost your refund, providing you with a little more cash. The credit is available for workers of both low and moderate incomes. Basic qualifying rules for the EITC include an income of under $57,414, no investment income below $10K from the previous year, and no foreign income on Form 2555 claimed. Even without a qualifying child, you can still claim the EITC if you meet all the other rules. Special qualifying rules apply to military, clergy members, and taxpayers who have relatives with disabilities. Read more about the EITC at IRS.gov.
3. There are Education Tax Benefits for College Students
The American Opportunity Tax Credit (AOTC) is available to students for the first four years of post-secondary education. The AOTC allows students a maximum credit of $2500. Students must be enrolled half-time in at least one academic period before the start of the tax year. If the credit drops your tax bill to zero, up to $1K of the remaining amount will be refunded to you. For more AOTC guidelines, visit IRS.gov.
The Lifetime Learning Credit can also be used if you claim up to $2K in qualified education expenses on your return. You can save on some frustrating back-to-school expenses if enrolled at an eligible institution for at least one period before the tax year and can use the credit. For more information on eligibility for the Lifetime Learning Credit, visit IRS.gov.
Deducting interest you’ve paid on a student loan is also possible. The interest deduction can reduce taxable income by up to $2500; no itemized deductions are required. To see if this deduction applies to you, visit IRS.gov.
If you want to learn more about tax deductions and how to reduce tax liability so that you keep more in your pocket, contact us at either of our convenient locations:
Estess & Associates, LLC
Small Business Services
7822 Highway 23
Belle Chasse, LA 70037
Estess & Company, LLC
Certified Public Accountants
128 Lakewood Drive
Luling, LA 70070
About Estess CPAs
Estess CPAs provide permanent solutions to IRS and state tax problems for taxpayers. Since 2001. Estess CPAs have been helping businesses and individuals succeed. With two locations to serve you, Estess CPAs have the expertise and credentials of larger firms without compromising the personal service our clients have come to appreciate.
At Estess CPAs, we believe information and planning enhance success. Specializing in small business solutions, we believe the key to successfully managing any business starts with well-informed accounting and payroll systems. Accurate and timely data empowers companies to analyze and react to upcoming needs and changes. Our professionals are experts at keeping accounting systems and payroll processes running smoothly.