Tax credits reduce the amount of tax liability you have in a given year. There are numerous tax credits, and most will be itemized on your 1040 form, unless otherwise noted. Below is a list of some of the most common tax credits.
-- The American Opportunity Tax Credit gives up to $2,500 for people pursuing undergraduate studies. It is claimed on form 8863.
-- The Making Work Pay is a tax credit worth 6.2 percent of a person's earned income, up to $400. It is a temporary credit available only in 2009 and 2010.
-- First-Time Home Buyer Tax Credit is a refundable tax credit for first-time home buyers. It is worth up to $7,500 for the purchase a primary residence. The house must be bought between April 9, 2008 and July 1, 2009 to qualify.
-- Energy Tax Credits are available home improvements made to increase energy efficiency in 2006, 2007 and 2009.
-- The Mortgage interest tax credit allows taxpayers to get credit for the interest paid on their mortgage.
-- Prior Year Alternative Minimum Tax gives credit for the amount paid in alternative minimum taxes the year before.
-- Qualified Electric Vehicle Credit - credit for using a qualified electrical vehicle.
-- The General Business Credit carries forward business credits from previous years, in addition to any current credits.
-- The Adoption Tax Credit applies if you adopted a child in that year and paid out-of-pocket expenses directly related to the adoption.
-- The Child Tax Credit applies if you have children.
-- The Retirement Savings Contribution Credit is given for contributing to a retirement savings account and requires form 8880.
-- Education credits include the Hope and Lifetime Learning credits, and are calculated on Form 8863.
-- Credit for the elderly or disabled - for those 65 or older or disabled.
-- Child care tax credit and dependent care expenses are given for day care and child care services and require form 2441.
-- Earned income credit: a credit that gives you a larger refund if certain criteria are met, including whether you have qualifying dependent children.
-- Educator expenses credit: for teachers who paid for classroom supplies themselves.
The Foreign Tax Credit is a credit for the amount of taxes paid to foreign governments.