3 key tax credits

Don’t miss these advantages when you file this year

A tax credit is among the most satisfying benefits you can turn up when preparing your return.

Unlike a deduction, which decreases the income on which you’ll be taxed, a tax credit reduces your overall tax due.

Here are some tax credits to review before you file:

1 Earned income tax credit The earned income tax credit, or EITC, helps lighten the burden for middle- and lower-income families.

The EITC is a “refundable” tax credit — if the credit is higher than your tax owed, the government will pay you the difference. Do you qualify? Eligibility mostly depends on your income, and you must have worked to receive it. For the 2022 tax year, the income limits range from $16,480 to $59,187, depending on your filing status. Other requirements: • You can’t have more than $10,300 in investment income. • Everyone on your tax return must have a valid Social Security number.

2 Child tax credit The child tax credit, or CTC, has undergone significant changes.

During the pandemic, the government temporarily increased the credit amount. But in 2022, the credit reverted to previous levels.

Still, the benefit can reach $2,000 per qualifying child, and up to $1,500 is refundable. People with dependents who don’t qualify for the full credit can be eligible for a credit up to $500.

Do you qualify? Families with children under 17 are generally eligible for the CTC as long as their kids have valid Social Security numbers.

The credit begins to phase out once your adjusted gross income exceeds $200,000, or $400,000 for those married filing jointly.

3 American opportunity credit

and lifetime learning credit

The American opportunity credit and lifetime learning credit are education-focused tax breaks.

The American opportunity credit is targeted toward students pursuing formal degree programs. The lifetime learning credit can be used for other types of training and education. You can’t claim both credits for one student.

Do you qualify? The American opportunity credit can only be used for four years of post-secondary education, and eligible students have to be enrolled at least half time. The lifetime learning credit can apply to graduate courses or vocational classes.

The credits have basic eligibility requirements in common. Both share an income limit of $90,000 for single filers and $180,000 for married people filing jointly.

This article was provided to The Associated Press by the personal finance website NerdWallet. Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org