As the tax season approaches, it’s important to know the 2023 tax credits you may qualify for to lower your tax bill. Since tax credits lower your tax liability, they are more useful than tax deductions.
In Zelienople, Pennsylvania, on February 13, 2019, a portion of a federal tax form 1040 can be seen in a file picture. The form was printed from the Internal Revenue Service website. (AP Photo/File: Keith Srakocic)
Tax bill dollar-for-dollar, whereas tax deductions only reduce your taxable income. Here are three tax credits you shouldn’t miss when you file your 2023 taxes:
1. Child Tax Credit: 2023 Tax Credit
If you have a young child who meets the requirements and is under the age of 17, you might be eligible for the Child Tax Benefit, which is worth up to $2,000 per child, which is worth up to $2,000 per child. To qualify, your child must have a Social Security number and live with you for more than half the year. Taxpayers’ access to the benefit gradually ends with adjusted gross incomes (AGIs) above $200,000 ($400,000 for married filing jointly).
Starting in 2023, the Child Tax Credit will be fully refundable for taxpayers who have an AGI of $200,000 or less ($400,000 for married filing jointly). This means that even if your tax bill is zero, you can still receive the full 2023 tax credit as a refund. This change is expected to benefit millions of low-income families.
2. Earned Income Tax Credit: 2023 Tax Credit
For employees with low to moderate incomes, there is the Earned Income Tax Credit (EITC), which is a refundable 2023 tax credit. You must have obtained money from a job, your own business, or farming in order to be eligible. Your income must also be below certain limits, which vary depending on your filing status and the number of qualifying children you have.
The maximum EITC for 2023 is $6,728 for taxpayers with three or more qualifying children. Taxpayers’ access to the benefit gradually ends with an AGI above $21,430 ($27,830 for married filing jointly) and ends for taxpayers with an AGI above $56,844 ($63,244 for married filing jointly).
The EITC is one of the most valuable 2023 tax credit available, but it’s also one of the most underutilized. According to the IRS, one in five eligible taxpayers fails to claim the credit each year. If you think you may qualify for the EITC, be sure to check the eligibility requirements carefully.
3. American Opportunity Tax Credit: 2023 Tax Credit
If you or your child is pursuing higher education, you may be eligible for the American Opportunity Tax Credit (AOTC), which is worth up to $2,500 per year for the first four years of college. To qualify, you must be enrolled in a diploma or award from a qualified institution.
The AOTC is available for 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000 of qualified education expenses, for a total credit of $2,500. To claim the full credit, your AGI must be $80,000 or less ($160,000 or less for married filing jointly). For taxes, the credit gradually expires with an AGI above these levels.
It’s important to note that you can’t claim both the AOTC and the Lifetime Learning Credit for the same student in the same year. You must choose the credit that provides the greater benefit for you.
Conclusion
These three 2023 tax credit can help you lower your tax bill and potentially receive a refund. Be sure to check the eligibility requirements carefully and claim all the credits you’re entitled to. If you need help preparing your tax return, think about collaborating with a tax expert who can assist you in maximizing your deductions and benefits.
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