The amount of your personal tax responsibility depends on how much of your income is taxable. The lower your taxable income, the less the government requires you to pay. And deductions can reduce your total taxable income.
The Earned Income Tax Credit (EITC) is available if your adjusted gross income (AGI) is less than a set threshold for your filing status and the number of dependents. For the 2024 tax year (filed in 2023), the maximum EITC ranges between $560 and $6,935.
Here are the maximum EIC amounts based on the number of dependents and the corresponding AGI maximums:
- $560 for tax filers with 0 dependents and earn less than $16,480 ($22,610 if married joint filers)
- $3,733 for tax filers with 1 dependent and earn less than $43,492 ($49,622 if married joint filers)
- $6,164 for tax filers with 2 dependents and earn less than $49,399 ($55,529 if married joint filers)
- $6,935 for tax filers with at least 3 dependents and earn less than $53,057 ($59,187 if married joint filers)
You may qualify for additional family tax relief credits if you have dependents. The child tax credit offers up to $2,000 per child, and the child and dependent care tax credit helps cover a percentage of child care for dependents younger than 13 years of age.
Likewise, you may claim up to $14,890 in adoption costs if you adopted a child in the 2022 tax year and earned less than $263,410. The adoption credit amount depends on your earnings, which incrementally lessens the more you make.
You can also lower your personal tax bill with credits. For example, if you qualify for a $200 credit, your $500 tax bill drops to $300. The government offers credits if you are a low- to moderate-income household, have dependents, have specific expenses, and make certain changes.
The government offers a standard deduction of a specific dollar amount that reduces your taxable income. You (and most tax filers) can claim the standard deduction for your specific filing status.
You can choose to take the standard deduction or itemize legal tax write offs, which require additional tax forms to prove you qualify. Generally, you should choose the higher-amount option.
To keep up with inflation, the standard deduction usually increases each year. The following are the 2023 tax year changes from the standard deduction in 2022:
- Single or married, filing separately – $13,850 from $12,950
- Head of household – $20,800 from $19,400
- Married, filing jointly – $27,700 from $25,900
If you are older than 65 years of age or blind, you have a higher standard deduction. Keep in mind that you cannot claim both the standard and itemized deductions. But you can claim credits with either the standard or itemized deductions.
Some of the most common types of tax deductions include:
- Certain charitable donations.
- Unreimbursed medical expenses and health savings account contributions.
- Select state and local taxes.
- IRA and 401(k) contributions.
You may be able to claim the next credits and deductions due to certain life choices, like going to college, running a business, and buying a home.
By Admin –
