As tax professionals, we often get asked about tax credits and tax deductions. Some people assume they are the same thing, but they are not. A tax deduction reduces your taxable income while tax credits provide a dollar-for-dollar reduction to your income tax liability. Which means tax credits are worth more. They directly reduce the amount you will have to pay in taxes. So, we decided to put together a list of potential tax credits for individuals and/or businesses.
- Child care expenses
- Adopting a child
- Energy efficient home improvements
- Purchasing an electric vehicle
- Investing in education
- Saving for retirement by contributing to an IRA, 401k etc
Some of these tax credits may go away by the end of this year or not apply to you. For example, the $7500 federal tax credit for some Tesla cars will be eliminated by the end of 2018. If you are not sure whether you qualify for certain tax credits, be sure to check with a tax professional before claiming the credit on your tax return.
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