Tax credits are a powerful tool for helping working families make ends meet. They provide a direct reduction in the amount of taxes owed, which can put more money in the pockets of those who need it most. The federal government offers several tax credits that can help working families, including the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC).
The Earned Income Tax Credit (EITC) is a refundable tax credit for low- and moderate-income working individuals and families. It is designed to help offset the cost of living and encourage work. The amount of the credit is based on income, filing status, and the number of children in the household. The maximum credit for 2020 is $6,660 for families with three or more qualifying children.
The Child Tax Credit (CTC) is a nonrefundable tax credit for families with children under the age of 17. The credit is worth up to $2,000 per qualifying child, and up to $1,400 of the credit is refundable. The credit is phased out for higher-income taxpayers.
The American Opportunity Tax Credit (AOTC) is a partially refundable tax credit for college expenses. It is worth up to $2,500 per eligible student, and up to $1,000 of the credit is refundable. The credit is available for the first four years of post-secondary education and is phased out for higher-income taxpayers.
Tax credits can be a great way to help working families make ends meet. They can put more money in the pockets of those who need it most, and help offset the cost of living. If you think you may be eligible for any of these credits, be sure to check with the IRS or a tax professional to see if you qualify.