Getting a head start on your tax preparations for 2023 is really necessary as the time for submitting taxes, which is April 15th, comes closer.
If you begin this procedure as soon as possible, you will have a better chance of receiving your tax refund sooner, given that you met the requirements. As you approach your 2023 tax return, here is an overview of the most important tax credits that you should take into consideration.
Maximize 2023 Tax Benefits
1. Child Tax Credit:
The Child Tax Credit, prominent in 2021’s relief package, continues to be noteworthy for 2023. Eligible individuals can claim up to $2,000 per child under 17, with $1,600 being refundable. Income limits apply, with the credit phasing out at $200,000 for single filers and $400,000 for joint filers.
2. Earned Income Tax Credit (EITC):
Designed for low to moderate earners, the EITC is fully refundable. Its value varies based on income and the number of qualifying children, with a maximum of $7,430 in 2023. This means that if your tax bill is reduced to $0, you could potentially receive a $7,430 refund.
3. Child and Dependent Care Credit:
Applicable to parents covering childcare expenses for work-related reasons, this nonrefundable credit encompasses expenses like daycare and daytime summer camp. Calculations involve deducting 20% to 35% of up to $3,000 (for one child) or $6,000 (for two or more children).
4. Lifetime Learning Credit:
For post-secondary education expenses in 2023, the nonrefundable Lifetime Learning Credit allows a 20% claim on up to $10,000 in eligible costs, providing a maximum credit of $2,000. Phase-out begins at $80,000 for single filers and $160,000 for joint filers.
5. American Opportunity Tax Credit:
Tailored for those in their first four years of higher education, the 40% refundable American Opportunity Tax Credit is worth up to $2,500. Income limits align with the Lifetime Learning Credit, and you cannot claim both credits for the same student in a given year.
Knowing how to use and apply these credits can greatly lower your IRS bill. While these aspects provide valuable insights, it is advisable to seek guidance from a tax professional to navigate the filing process effectively and discover any additional tax benefits you may be entitled to.
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