When you fill out your income tax form this year, pay special attention to tax credits. Federal Tax Credits can help you reduce the amount of tax you pay. In fact, refundable tax credits come directly off the taxes you owe. Tax credits are worth more to you than tax deductions. Tax deductions help reduce your gross income. The Child Tax credit and the Earned Income Tax credit will help you reduce the taxes you have to pay.
Make sure you claim all of the tax credits coming to you, so you are not paying too much in taxes. Tax credits are separated into two groups: refundable, and non-refundable. Sometimes you can get a tax refund just by claiming all of the tax credits owed to you.
Tax credits in the non-refundable category will not create a refund, if the credits add up to reduce your taxes owed to zero. These include charitable donations, or the Saver's Tax Credit. Tax credits can encourage people to work, even if they are earning minimum wage. People, who oppose the tax credit system, suggest raising the personal exemption would be a better form of tax relief for low-income earners. Your tax exemption is the amount of money you can earn tax-free depending on your tax status.
You may want help figuring out your taxes so you can maximize your deductions and tax credits. You can hire a tax expert, or an accountant. You can also file your taxes online with tax preparation software that will do many of the calculations for you. Many electronic tax programs will include prompts, questions or hints to help ensure you receive any tax credit coming to you.
You can check the IRS website to see which tax credits you may be able to claim. Once you deduct your tax credits, you may realize you have a tax refund coming to you. You should to try to have the income tax taken off your cheque closely match your actual taxes owed. If you pay too much, you are giving the government an interest free loan, until you get your refund.