A tax credit is a benefit that directly reduces your income tax. A tax deduction, on the other hand, reduces your taxable income.
Some tax credits are meant to encourage certain behavior. For example, the Earned Income Tax Credit encourages lower income taxpayers to earn income. Other credits offset certain expenses or overpaid taxes.
These are some of the most popular tax credits available in 2013:
If you pay adoption expenses, or if you finalize an adoption for which you paid adoption expenses in a prior year, you may be able to take a credit. This is a dollar-for-dollar credit that reimburses you up to $12,970. This credit is not refundable, meaning you cannot take the full amount if your tax is less than your available credit. You can carry forward any remaining amount for up to five years.
The expenses you pay for someone to care for your child under age 13 while you work may qualify you for a sizeable credit. You can also take the credit if you have a dependent age 13 or older that requires care, or if you pay someone to care for your disabled spouse. Depending on your income level, you may qualify for a credit of 20% to 35% of the amount you pay for care.
Your maximum credit if you have one child or other qualified individual is $1,050 in 2013. If you have two or more children or qualified individuals, your maximum Child and Dependent Care Credit is $2,100.
You, and your spouse if you are married, generally must both have earned income to take this credit. There are exceptions if one of you works and the other is a student, is looking for work, or is disabled.
You may qualify for a credit of up to $1,000 for each of your children under age 17 at the end of the year. If you cannot take your full Child Tax Credit because you owe little or no income tax, you may be able to take the Additional Child Tax Credit. This credit is refundable, meaning you may be able take the full credit even if the amount of tax you owe is less than your available credit. This credit is limited at higher income levels.
If you are in the lower or middle-income levels and you contribute to a retirement plan, you may get a credit equal to part of your retirement plan contribution. This is in addition to any other tax benefit, such as the deduction for contributing to your traditional Individual Retirement Arrangement (IRA). You must be at least age 18 and not a student to take this credit. In addition, you cannot take the credit if someone else can claim you as a dependent on his or her return.
The maximum Saver's Credit in 2013 is $1,000 ($2,000 if you are married filing jointly).
This credit, now good for all four years of undergraduate studies, pays for up to the first $2,000 you spend on tuition, fees, books, supplies, and equipment by giving you a credit for up to 100% of that amount. If you qualify, it also gives you 25% of the next $2,000 back as a credit, for a total credit of up to $2,500. The credit can be for you, your spouse, or your dependent. The student must be enrolled at least half time and not have been convicted of a felony possessing or distributing a controlled substance for you to take this credit. The credit phases out at higher income levels. This credit is refundable for up to 40% of the credit or $1,000, whichever is greater.
The Lifetime Learning Credit provides a credit equal to 20% of your tuition and certain related expenses up to $10,000. You may receive a credit of up to $2,000 per student. This credit also phases out at higher income levels. You can take this credit for any number of years for each student, regardless of the student's workload or whether the student is working toward a degree.
This is a credit for low-income people who work. The credit is refundable, which means you may receive more Earned Income Tax Credit as a refund than you paid or had withheld in taxes. Depending on your income level, filing status, and number of children, you may receive as much as $5,891 back for this credit.
This credit is a refund to reduce a double tax burden you would otherwise have if you pay tax to a foreign country on part of your income. Many U.S. residents pay foreign tax, and therefore qualify for this credit, if they invest in mutual funds that pay foreign taxes.
January 1 — Everyone
Federal Holiday (New Year's Day) Details
January 10 — Employees who work for tips
If you received $20 or more in tips during December, report them to your employer Details
January 15 — Individuals
Make a payment of your estimated tax for 2018 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES Details
January 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in December 2018
January 15 — Farmers & fishermen
Pay your estimated tax for 2018 using Form 1040-ES Details
January 21 — Everyone
Federal Holiday (Martin Luther King, Jr. Day) Details
January 31 — All Employers
Give your employees their copies of Form W2 for 2018. If an employee agreed to receive Form W2 electronically, have it posted on a website and notify the employee of the posting.
January 31 — Individuals who must make estimated tax payments
If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2017 by January 31. Filing your return and paying any tax due by January 31 prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by January 31, file and pay your tax by April 15.
January 31 — Payers of gambling winnings
If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W2G.
January 31 — Social Security, Medicare, and withheld income tax
File Form 941 for the fourth quarter of 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until 02-10 to file the return.
January 31 — Certain small employers
File Form 944 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more for 2018 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.
January 31 — Farm employers
File Form 943 to report social security and Medicare taxes and withheld income tax for 2018. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.
January 31 — Federal unemployment tax
File Form 940 for 2018. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.
January 31 — All businesses
Give annual information statements to recipients of certain payments you made during 2018 Details