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A tax credit reduces the amount of taxes that you pay, while a deduction lowers the amount of income that you claim.
Many such credits are dependent on the amount you earn, and there are more credits available for low-income earners.
There are several different types of tax credits available.
Under the Child Tax Credit, you receive a credit of $1000 for every eligible dependent child.
Be certain that you know the dependent qualifications and that you claim only the children who meet those requirements.
There is an Education Credit available to both full time and part time students.
If you have just begun college or if you have been in the workforce and are looking to improve your career opportunities, you may qualify for the Education Credit.
You can claim as much as $1650 toward your educational expenses for the year.
Your school will normally send you a tax statement.
If you have done home improvements in order to make your house more energy efficient, you can claim up to $500 under the Home Energy Efficiency Credit.
Hang onto receipts so you can prove that the work was done.
There are other credits available as well.
If you use a software program to do your income tax return, it will prompt you for any tax credits or deductions your information suggests that you are qualified to receive.
When filing for such credits, always be certain that you meet the qualifying requirements.
In the event that you do not meet the requirements, the IRS will disallow the credit and your income tax return will change because of that, probably increasing your tax liability more than you thought.
On the other hand, be sure that you file for all the tax credits for which you are qualified.
Otherwise, you might just as well donate your money to the IRS.
For additional information about any such credits and how you might qualify, go to the Internal Revenue Service website at IRS.
gov.
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