Tax credits are a form of incentive that allows you to reduce the amount of money you owe the state. These credits are often given as recognition of past taxes you have already paid or in the form of a state discount. They can be helpful in reducing your tax bill and making it easier to make your monthly payments. However, they can also be confusing and difficult to obtain. Here are a few things to keep in mind when requesting tax credits.
Tax credits help people with low and moderate incomes reduce their taxes. One of the most popular tax credit programs is the Earned Income Tax Credit, which is the largest anti-poverty program in the U.S. The EITC is worth $62 billion, which means that it can help nearly 25 million workers. An eligible household can receive up to $6,728 of tax credits each year. In addition, claiming tax credits will not count as income, so it won’t affect your eligibility for other public benefits. Moreover, under U.S. Citizenship and Immigration Services’ “public charge rule,” tax credits don’t count as public benefits.
You may qualify for a tax credit if you are paying for childcare for your qualifying children. Some tax credits are refundable, so you can get a bigger refund. Examples of partially refundable tax credits are the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit (CDCC), and the New York City Child Care Tax Credit. If you qualify for one or more of these tax credits, be sure to check out IRS Publication 503 for more details.