A Look At How Tax Credits Work
Taxes can be confusing, people just want to avoid them. They have the reputation of being frustrating and time-consuming, so people avoid learning about them, and put off filing them until the last possible minute.
However, there are ways to save tons of money on your tax bills! Spend a few minutes researching your options and learn all about tax credits here to turn your filing process into a celebration instead of a dreaded event.
Tax Credits
To put it simply, a tax credit is a reduction in the amount of income tax that you owe, in a dollar for dollar amount. Tax credits can greatly reduce the amount of money you owe to the federal and state governments, so they’re good to take advantage of.
Tax credits were designed to encourage and reward activities that the government deems to be important. These activities or actions include things that benefit the environment, economy, society, and more.
A few actions that will give you tax credits include installing solar panels, adopting a child, or being a student. The list goes on and on.
Tax credits reduce the amount of tax you owe dollar for dollar. They could reduce your tax bill to zero, however, remember there are different types of tax credits. Nonrefundable tax credits don’t reduce the amount you owe below zero.
Refundable credits can be fully or partial. If they’re fully refundable and the amount you owe decreases below zero then you’ll be paid for that amount. For example, if your bill is $500 and you have $700 in tax credits then you’ll receive a check for $200. Now that makes filing your taxes a little more exciting, doesn’t it?
Now you don’t automatically get tax credits. They generally consist of expenses you pay during the year and you have to meet the specific requirements and file for them on time.
Tax credits usually save people more money than deductions because tax credits are dollar for dollar on the amount you owe. Tax deductions reduce the amount that’s subject to income tax. Also, deductions calculated with percents and depend on tax rates.
Need More Time To File?
If you’re new to tax credits and need to take the time to speak with a professional or research what exactly you can claim as tax credits before you file then head to ExpressExtensions to e-file an extension on your tax forms. Then you’ll have more time to file your taxes later.
The E’s in ExpressExtension stand for easy because we provide the forms you need with step by step instructions on how to fill them out. If the IRS rejects your form we will notify you via email with instructions on how to make your correct. You can then resubmit your form as many time as you need to.
Best of all, we’re here to help. Our dedicated support team is standing by to help you with any questions that you may have, so please don’t hesitate to contact us via phone or email.
