It’s your money: 10 ways to keep it at tax time
IRS and Michigan tax credits add up to huge savings for those who qualify.
During income tax filing season from January to April 15, most filers receive a refund, according to IRS statistics. Tax credits reduce taxes owed while tax deductions subtract from taxes owed. The good news is there are many federal and Michigan tax credits to reduce the amount owed and generate significant tax refunds for those eligible.
If you contributed up to $2,000 in your retirement plan or IRA, you could qualify a Saver’s Credit. Plan ahead by including regular deposits to your retirement accounts, with the amounts depending on your Adjusted Gross Income (AGI). Check with the IRS for current dollar amounts of what you can contribute to 401(k), 403(b) and most government plans.
Earned Income Tax Credit (EITC) provides tax breaks for low and moderate income working families and individuals. Michigan also has its own EITC that you can take advantage of.
Homestead Property Tax Credit in Michigan is a refundable credit for eligible Michigan residents who pay high taxes or rent in relation to their income.
As a side note, several homeowners contacted our office recently struggling to pay their property taxes. We discovered they were not receiving the Homestead Exemption to lower their local property taxes about 40 percent, even though the home was their primary residence. We advised them to go to their county Assessor’s Office with proof they lived in the home (for example, a utility bill) to file the paperwork asking for up to a three-year credit.
More federal tax credits and deductions that may apply to you are the Federal Child Tax, Child and Dependent Care, and the American Opportunity Tax Credit for College Education. In Michigan, you may be eligible for a Home Heating Credit. These are the most commonly used tax credits you might qualify for when filing your 2016 income taxes.
More saving tips during tax season?
- Do not pay to have your taxes done. Find out where you can go for free tax help by visiting www.michiganfreetaxhelp.org or calling 2-1-1.
- Do not pay for “rapid refunds”. Keep all your refund money, and do not fall for advertisements claiming your refund may be delayed for weeks or months.
- File early. The IRS is encouraging all filers to submit their returns early because of tax fraud and identity theft cases.
Take time to understand your tax credits for filing your income tax return. Many participants in Michigan State University Extension’s money management workshops have expressed a difficulty with finding the money to save. By taking advantage of the available tax credits and deductions, you can start off the New Year on the right path to meeting your financial goals. Also check out the tax time saving tips from the Consumer Financial Protection Bureau.