Do you know that there are dozens of Tax Credits designed to help you put more money in your pocket? We have compiled this comprehensive list of “IRS Tax Credits: The Complete Guide” as a resource that you can utilize to help save tax dollars.
We will show you both Individual Tax Credits and Small-Business Tax Credits. We will also tell you which tax forms you need to file to claim these credits.
What is Tax Credits?
Tax Credit is an incentive offered by Government to help individuals or small business owners. Tax credits offers dollar for dollar tax reduction in tax due or increases your tax refunds.
For example if you owe IRS $3000 and You can get a Tax Credit for $1000, then you will only need to pay $2000 instead of $3000. Hence it reduces your amount due.
What Tax Credits are Available in 2022
Tax Credits Vs Deductions
Tax Credit reduced your tax liability dollar for dollar while Tax Deduction simply reduces your taxable income as a result you pay less taxes on the total income.
Overall Tax Credits are much better as you get much larger benefit than a Deduction.
Learn More>> We have put together list of other articles that you will find useful
Individual Income Tax Credits
Individual Income Tax Credits typically are associated with individuals and families. These credits are designed to help taxpayers who are either low income or have children or are attending university to further their education and career.
Tax Credits for Children & Childcare
- Advance Child Tax Credit Payments
- Child Tax Credit and Credit for Other Dependents
- Recovery Rebate Credit
- Earned Income Tax Credit
- Child and Dependent Care Credit
- Adoption Credit
Tax Credits for Family
Tax Credits for Home Owners
- Residential Energy Efficient Property Credit. This Credit Includes Tax Credit for Solar Panels. See our Detailed article on Solar Tax Credit Here.
- Plug-in Electric Drive Vehicle Credit at a Glance. See our Detailed Article on The Federal Electric Car Credit here.
Tax Credits for Health Insurance
Tax Credits for Educations
American Opportunity Credit and Lifetime Learning Credit This credit is designed to encourage US taxpayers to pursue higher education and help reduce the cost by proving Tax Credits for Education.
Other Individual Tax Credits
- Saver’s Credit (Retirement Savings Contributions Credit) This credit is designed for low income taxpayers to start their retirement plan. This credit helps jumpstart low income taxpayers savings account by giving them credit if they contribute money to their retirement plans.
- Foreign Tax Credit: Provides Tax Credit against US taxes due for any payments paid to Foreign Taxes.
- Excess Social Security and RRTA Tax Withheld This typically happens when you work for multiple employers during the year and your income is higher than Social Security Max Threshold. In this case both employers end up withholding taxes from the taxpayer. When this happens you are allowed to get a tax credit for excess social security paid
- Credit for Tax on Undistributed Capital Gain
- Credit for Prior Year Minimum Tax
Small-Business Tax Credits
Small-Business Tax Credits are especially designed by Federal and many state governments to incentivize small businesses to hire more people, invest in certain geographical areas and many other reasons. We have compiled a list of Small-Business Tax Credits that are especially helpful
- Tips Credit (Also Known as Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips): You need to file form 8846 in order to claim this credit. This is very valuable credit for restaurant and hospitality industry where social security tax is paid on tips. Employers get to get credit for the social security tax paid on the tip amounts.
- Qualified Opportunity Zone: This was approved by President Trump that is designed to spur investment in areas that are disadvantaged economically and need large amount of investment. See our Article that goes in more detail by clicking here
- Work Opportunity Credit: If you want to claim this credit, you need to file Form 5884 along with your tax return.
- Credit for Increasing Research Activities: In order to claim this credit you need to file form 6765 when you file your 1040.
- Employer Credit for Paid Family and Medical Leave: In order to receive this credit, you need to file IRS form 8994 along with your 1040.
- New Markets Credit: In order to claim this credit file Form 8874 along with your tax return.
- Small Employer Pension Plan Startup Costs: In order to claim this credit file Form 8881 along with your tax return
- Credit for Childcare Facilities and Services provided by Employer: In order to claim this credit don’t forget to file Form 8882
- Credit for Small Business Health Insurance Premiums: This credit is designed to help small businesses make health insurance more accessible to their employees. This provides credit to help setup and operate Health insurance benefits for your small business. In order to receive this credit, you need to file IRS form 8941
- Disabled Access Credit: Disabled Access Credit is designed to help small businesses with creating Disabled Access to their small businesses. This could be Ramp or Railing or making Fuel pumps more accessible. You need to file Form 8826 in order to take Disabled Credit on your tax return.
Here is a link to IRS website if you are looking for more information.