A tax credit is a dollar-for-dollar reduction of your tax bill and if it’s a “refundable” credit, which some are, it can actually increase your refund.
Some credits to be aware of, especially if you’re not making a lot of income:
The Earned Income Tax Credit: The EITC is intended to help low- and moderate-income workers (defined in 2022 as those with earned income under $59,187), and especially filers with children.
The EITC is also available to earners without qualifying children and it’s worth $560 for 2022.
Education credits: If you were in school last year, footed the costs and are not claimed as a dependent on anyone else’s tax return, you may be eligible for an American Opportunity Tax Credit or a Lifetime Learning Credit. To see if you qualify, here’s an IRS table comparing the eligibility requirements and the value of each of those credits. Also, check to see if your educational institution sent you a Form 1098-T, which you will need if you claim one of these credits.
The Saver’s Credit: The Saver’s Credit is a federal match for lower-income earners’ retirement contributions for up to $2,000 a year.
The Child Tax Credit: If you’re a parent you may claim a maximum child tax credit of $2,000 for each child through age 16 if your modified adjusted gross income is below $200,000 ($400,000 if filing jointly). Above those levels, the child tax credit starts to get reduced. And the portion of the credit treated as refundable — meaning it is paid to you even if you don’t owe any federal income tax — is capped at $1,500, and that is only available to those with earned income of at least $2,500.
And if you paid for child care in 2022, you may be eligible to claim a dependent care credit.