Need money but can’t make any more of it? Time to let the government know it owes you a tax refund. If you are a taxpayer of the United States, you can check your eligibility for either tax credits or tax deductions. Let us look at what they are and how you can qualify for them.
A tax credit reduces the actual tax you owe unit for unit. If you get a $100 tax credit, you pay $100 less to the government, period. Now a tax deduction on the other hand, works indirectly by reducing your taxable income. Further it depends on which tax bracket you fall in. If you are in the 15% category and you get a $100 tax deduction, you save $15 in tax. Because of this, a tax credit seems more desirable than a tax deduction. But in practice what really matters is knowing which of the two you are eligible for, or at least knowing a good accountant or tax lawyer who can do it for you.
Now you know what tax refund options are available, how can you get them? Generally, by spending money on anything important. For example, you may qualify for a tax deduction for: home mortgage payments, work- and business-related expenses (such as transportation, clothing, operation costs), school tuition, tax exemptions, charitable donations… and even gambling losses.
You may be eligible for a tax credit if you have low income, are over 65 years old, or have a permanent disability. If you have a child or disabled relative, or if you adopt a child, you may also qualify for a tax credit.
Knowing what tax refunds you are eligible for can literally save you thousands of dollars. So it’s important to document all your spending and review them for all possible deductions and credits. If you find the process too complicated for you, you can hire a tax lawyer or accountant or buy tax software to help you.