26 Apr Advice from Your Accounting Firm: Tax Credits
Accounting Firm Tips on Tax Credits
You may have heard of tax credits before and mistaken them for deductions. This is a common misconception, and missing out on tax credits means money out of your pocket. If you have tax credits available, you’ll definitely want to claim them. If you’re not sure whether or not you have tax credits available to you, you can always consult with an accounting firm. Today in the Jeff Pickering, CPA blog we’ll discuss tax credits in further depth.
What is a Deduction?
First, let’s review what a tax deduction is. Tax deductions reduce your taxable income as long as you claim them. Most people opt for the standard deductions, but if it’s better for your unique situation, you can itemize your deductions. If you’re not sure whether to itemize your deductions or go with the standard deduction, consult with your accounting firm to learn the best course of action.
What is a Tax Credit?
Tax credits are a way to reduce your tax liability, dollar for dollar. Tax credits can either be nonrefundable or refundable. If a tax credit is nonrefundable, it can’t reduce your tax liability below zero. If the credit is refundable, and the amount of the credit is greater than your tax liability, you can get a bigger tax refund.
Common Tax Credits
There are a wide variety of tax credits that people can claim. The most commonly claimed tax credit is the Earned Income Tax Credit. This is a refundable credit available to low or moderate-income individuals or couples, who may have children. Another example is the American Opportunity Credit. This credit can be claimed by students who are pursuing a higher education. Energy credits are also available to those who make an effort to save energy, such as installing solar panels. These are just a few examples of the tax credits that are out there. Consult with your accounting firm to find out what tax credits you may be eligible.
Choose an Accounting Firm You Can Trust
Taxes can be complicated, and if you’re missing out on deductions or credits, you’re missing out on money. Consulting with an accounting firm and doing your taxes through one makes sure that your taxes are done comprehensively. Jeff Pickering, CPA can help you get your taxes done right, and advise you how best to take care of them throughout the year. Consult with an accounting firm you can trust and schedule an appointment with Jeff Pickering, CPA today.