Income tax deductions are good; if you are in a 30% tax bracket and receive a $100 deduction, that’s $30 saved. But tax credits are great! For a $100 tax credit, you put $100 in your pocket, irrespective of your tax bracket.
Congress has created a number of income tax credits for 2010; some of which follow:
- Making work tax credit. For single wage earners, $400, and those filing joint returns, $800. It phases out for single taxpayers between $75,000 and $95,000 and for joint returns between $150,000 and $190,000.
- Home Energy Credits. For residential properties, a credit not to exceed $1,500 of 30% of the cost of adding insulation, storm windows and doors, and energy-efficient heating and cooling units, provided installation is completed in 2010. An additional credit which runs through 2016, with no limit, is 30% of installation of solar panels, thermal heat pumps, and fuel cells.
- Adoption Credits. For people adopting a child, a credit which runs through 2011 up to $13,170 to reimburse them for adoption expenses. This credit phases out for households having income of $182,250 to $222,250.
- Education Credits. For post high school education a tax credit of 100% of the first $2,000 and 25% of the next $2,000, or a maximum tax credit of $2,500. Of the credit allowed, 40% is refundable in subsequent years (i.e., 40% must be repaid), and the credit phases out for single taxpayers between $80,000 and $90,000 and for joint filers between $160,000 and $180,000.
- Home Buyer Credits. Although it expired for homes purchased after April 30, 2010, for any first-time home buyer who was under contract prior to April 30th and settled on the home before June 30, 2010, an $8,000 credit. For non-first time buyers, the credit is $6,500. It is important to note here, that this is a “refundable” credit in that 1/15th of it must be reported as income over the succeeding 15 years.
- Business Credits. For employers of less than 50 people, a credit to partially reimburse payment of health care premiums.
- Hiring Unemployed Credit. A credit of $1,000 per employee who was previously unemployed, is hired after February 3, 2010, and remains on the payroll for at least 52 consecutive weeks. Additionally the employer need not pay social security taxes for such employees for the remainder of 2010.
— Ken Butera