What tax credits are there for US citizens?

The subject of the Child Tax Credit has been front and central in recent weeks as President Biden looks to secure an extra year of the expanded credit which has been in place in July. The Build Back Better bill includes a provision to extend the programme through 2022 but its passage is far from certain.

The American Rescue Plan ensure that recipients have the option to get an enhanced Child Tax Credit in the form of a monthly payment, a system that has been linked to a 24% fall in food insecurity in recent months.

But the Child Tax Credit is far from the only credit offered to filers in the United States; we take a look at the credits and deductions currently on offer…

Child Tax Credit

As mentioned, the American Rescue Plan brought about a sizeable expansion of the programme with larger payments on offer and removing the previous thresholds preventing low-income households from receiving the full amount.

This year the maximum annual entitlement is $3,600 for children aged below six and $3,000 for those aged between six and 17. It is still to be decided whether this structure will stay in place in 2022 or if it will revert to the old system.

Earned Income Tax Credit

For those with a low to moderate income level the Earned Income Tax Credit (EITC) allows eligible filers to reduce their tax bill at the end of the year. You can even be eligible for the tax relief if you file little or no taxes, although you will need to submit your returns to trigger the credit payment.

If the EITC reduces your outstanding tax bill to less than zero, you may receive a refund payment.

Tax Benefits for Education

To help cover the cost of various education-related expenses there are a number of credits on offer for elementary, secondary school and college students. You can find out what education tax credits you are eligible for by using the IRS’ Interactive Tax Assistant.

There are education savings plans which can be used to add to a tax-free fund, which can be used for everything from books and educational supplies to paying off up to $10,000 in student debt.

Energy Tax Incentives

Anyone hoping to make improvements to their energy system at either their home or business can take advantage of beneficial tax conditions. There are tax credits for those making energy-saving alterations or buying ‘green’ appliances, available on a local, state and federal level.

Tax Relief for Disaster Situations

You can apply to the IRS for special tax assistance if you, your household or your business have been affected by an emergency or major disaster.

Federal Tax Deductions for Charitable Donations

Charitable donations which go to a 501(c)3 organization can be tax deductible, meaning that you can use them to reduce the size of your outstanding tax bill. To do so you must file a Schedule A form as part of your tax filing.