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Energy Tax Credits
You may be able to take the credits on your taxes in 2016 if you made energy saving improvements to your home located in the United States.
2016 Federal Tax Credits
Tax Credit: 10% of cost up to $500 or a specific amount from $50-$300.
Expires: December 31, 2016
Details: Must be an existing home & your principal residence. New construction and rentals do not apply.
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Tax Credit: 30% of cost with no upper limit
Expires: December 31, 2016
* (Tax credits for Solar Energy Systems are available at 30% through December 31, 2019.
The credit decreases to 26% for tax year 2020; drops to 22% for tax year 2021 then expires December 31, 2021)
Details: Existing homes and new construction qualify. Both principal residences and second homes qualify. Rentals do not qualify. |
| Geothermal Heat Pumps |
| Small Wind Turbines (Residential) |
| Solar Energy Systems * |
* The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the IRS.
Child Care Credits
The Child Tax Credit (CTC) is a federal tax credit designed to help families offset the cost of raising children. The credit was created in 1997 and expanded in 2001 and 2009. Under current law, the credit is worth up to $1,000 per child under age 17 at the end of the tax year, and is subtracted from the amount of income taxes the family owes. Since a portion of the credit is refundable, if the credit exceeds the amount of taxes the family owes, a percentage of the remaining credit is given back to the family in a refund check, and is officially called the Additional Child Tax Credit. A family can receive a refund worth 15 percent of earnings above $3,000, up to $1,000 per child.
Families must have at least $3,000 in earned income to claim any portion of the credit. The refund formula means that families with one child become eligible for the full credit with incomes of $9,666 or more, families with two children when they have incomes of $16,333 or more, and for each additional child the minimum income to receive the full credit increases by $6666. The credit begins to phase out when family income reaches $75,000 for a single filer and $110,000 for couples. The phase out allows families to claim a portion of the credit, capped at 5 percent of their income over the phase out threshold, so married couples making $130,000 ($95,000 for heads of household) with one child receive no credit at all, while families with two children are eligible for a partial payment with incomes up to $150,000 ($115,000 for heads of household) and families with more children are eligible at even higher income levels.
If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses.
- The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
- The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
- You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
- The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.
- Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
- The qualifying person must have lived with you for more than half of 2010. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.
- The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
- For 2010, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
- The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.
- If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.
For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses
American Opportunity Credit
The American Opportunity Credit can save you up to $2,500 in tax for the education expenses of each eligible student. To qualify, the student must pursue a degree at a school that is eligible to participate in the federal student aid program. The credit is only available to students in their first four years of attendance, who enroll at least half time for one academic period during the tax year and do not possess a felony drug conviction.
The credit amount includes the costs you incur for tuition, fees and course-related books, supplies and equipment necessary to attend the institution. If the credit amount exceeds the amount of tax you owe, you can receive up to $1,000 of the credit as a refund.
Lifetime Learning Credit
Lifetime Learning Credits are available to all taxpayers who attend at least one course during the year at an institution eligible to participate in the federal student aid program. It is not necessary that the student pursue a degree or certification to qualify, and it's available for any year of study. The credit covers the cost of tuition and fees plus any amount for books and supplies you are required to purchase directly from the school.
This credit is of particular value to those students attending postgraduate programs. As of 2015, the maximum benefit of the credit is $2,000. However, the lifetime learning credit is nonrefundable if it exceeds your tax bill for the year.
Tuition deductions
What is the tax benefit of the tuition and fees deduction? The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction is claimed as an adjustment to income. This means you can claim this deduction even if you don't itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if you don't qualify for the American opportunity or lifetime learning credits.
What is the Saver’s Credit?
The Saver’s Credit (aka the ‘retirement savings contribution credit‘) is a lesser known, highly advantageous tax credit that the IRS offers to incentivize low and moderate income taxpayers to make retirement contributions to an IRA, 401K, 403B, 457B, or any other IRS recognized retirement account.
What is nice about the Saver’s Credit is that it is an actual tax credit – not merely a tax deduction. If you’re not sure how the two differ, a tax deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A tax credit, on the other hand, actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far more valuable monetarily than a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only be subtracted from the taxes you owe, possibly down to zero, but it can’t provide you with a tax refund.
Unfortunately, due to its limited popularity (and a serious lack of retirement contributions), only about 12% of eligible taxpayers actually claim this tax credit – which is a damn shame, since it is so advantageous!
Still, there’s people out there taking advantage of the Saver’s credit. According to the IRS, in tax year 2012, the most recent year for which complete figures are available, saver’s credits totaling $1.2 billion were claimed on more than 6.9 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $165 for heads of household and $127 for single filers.
As we’re nearing the end of a calendar year, we’re at an important crossroads of still being able to take advantage of the Saver’s Credit in 2015, while starting to plan ahead for 2016.
How much is the Saver’s Credit?
The short answer is that it depends on your income level and your contribution amount. It will take a small bit of effort to determine how much of a credit you will receive, but don’t let that deter you – if you are eligible, the result is free money!
The absolute most you could receive in a given year is $1,000 on a retirement contribution of $2,000 (double those numbers if married and filing jointly). In order to figure out what kind of credit you are eligible to receive, you will have to fill out IRS form 8880 (PDF), as the credit phases out at certain income levels. Or check out the contribution tables here.
Once you figure out the amount of the credit from form 8880, add it to Form 1040 (PDF), or on Form 1040A (PDF).
The 2016 versions of these forms has not yet been released, but income eligibility and phaseout limits have gone up slightly. I’ve highlighted the maximum income levels to qualify below.
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