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Money Girl
097 MG Gimme Some Tax Credit
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Let LinkedIn Sales Navigator help you sell like a superstar today. Hello and welcome to Money Girl's Quick and Dirty Tips for a Richer Life. I'm your host, Laura Adams. In the last episode, I talked about some tax exemptions. In today's show, I'm going to give you some tips on ways to lower your taxes by taking advantage of tax credits. A tax exemption and a tax credit both save you money, but they do it in different ways. An exemption or deduction reduces your taxable income before taxes calculated on that amount. But a tax credit reduces the total amount of tax you must pay. Since a tax credit allows you to subtract taxes dollar for dollar, it's even better than a deduction. So I want to make sure you begin to think about every tax credit you can take for the 2008 tax year. When it comes to tax deductions, everyone is entitled to what's called the standard deduction. For 2008, the standard deduction is 5,450 for singles, as well as for married people filing separately. For those who are married and filing jointly, it's 10,900, and for heads of household, it's 8,000. You get to choose between taking the standard deduction or adding up all your individual deductions and using that amount. You can use the amount that's higher and the most beneficial to you. I recommend going through the process of calculating your potential deductions because the total could be higher than you think. According to the IRS, two out of three taxpayers take the standard deduction rather than itemizing their deductions, like mortgage interest, medical expenses, and charitable contributions, for example. But let's get back to tax credits. You can take every tax credit to which you're entitled, whether you take the standard deduction or not. Each year, many taxpayers overlook tax credits because they simply don't realize that they qualify to take them. Consider whether you can take advantage of the following eight tax credits. Number 1. The Earned Income Tax Credit This is available to working families who earn less than 41,646 per year if married filing jointly. Childless workers with incomes under 15,880 also qualify. The maximum credit is 4,824 for those with more than one qualifying child. Number 2. The Child Tax Credit This is usually available if you have a child under the age of 17. The maximum credit is $1,000 per eligible child. This is in addition to the $3,500 dependent exemption that was discussed last week in show 96. However, the credit is reduced if your income is above a certain amount. Number 3. The Child and Dependent Care Tax Credit This one is available if you must pay someone to care for a dependent child under the age of 13, any other dependent you claim, or a spouse who is unable to care for themselves in order for you to go to work. Number 4. The Hope Education Tax Credit This is available to help pay college tuition and fees for you or your dependents when enrolled in school at least half time. The maximum credit is $1,800 and is available for the first two years of education. The credit is reduced if your income is above a certain limit. Number 5. The Lifetime Learning Tax Credit This is another education credit that's available to help pay tuition and fees for you or your dependents, even if they're only enrolled in one college course. It's also limited based on your income level. So maybe that computer class you took at the community college this year could actually help reduce your taxes. Number 6. The Savers Tax Credit This is available to workers who contribute to a retirement account such as an IRA or a 401(k). You qualify if you're single or married filing separately and earn less than $26,500. If you file as a head of household, the income limit is $39,750 and for married filing jointly, it's $53,000. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel, planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but Policy Genius makes the process a breeze. With Policy Genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy Genius' technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork and advocate for you throughout the process. It's never too late to plan ahead. Go to PolicyGenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's PolicyGenius.com. Are you struggling to close deals? Cold Outreach is wasting the time of both the buyer and seller at every stage, especially when sellers are using outdated data. Your organization can overcome these challenges with LinkedIn Sales Navigator, the first deep sales platform. Right now, you can try LinkedIn Sales Navigator and get a 60-day free trial at LinkedIn.com/trial. That is, LinkedIn.com/trial for a 60-day free trial. Let LinkedIn Sales Navigator help you sell like a superstar today. AI might be the most important new computer technology ever. It's storming every industry and literally billions of dollars are being invested. So buckle up. The problem is that AI needs lots of speed and processing power. So how do you compete without costs spiraling out of control? It's time to upgrade to the next generation of the cloud, Oracle Cloud Infrastructure or OCI. OCI is a single platform for your infrastructure, database, application development and AI needs. OCI has four to eight times the bandwidth of other clouds, offers one consistent price instead of variable regional pricing. And of course, nobody does data better than Oracle. So now you can train your AI models at twice the speed and less than half the cost of other clouds. If you want to do more and spend less like Uber, 8x8 and Databricks Mosaic, take a free test drive of OCI at oracle.com/advanced. That's oracle.com/advanced oracle.com/advanced. Remember that IRA contributions can be made until April 15th following the tax year. The maximum credit is $1,000 for singles and 2,000 for married people. Number seven, the energy savings tax credit. This credit is available if you make energy efficient improvements to your home, no matter what your income level. This includes purchases such as exterior doors and windows, water heaters, heat pumps, air conditioners and furnaces. The maximum credit is limited to $500. There's also a 30% credit for the cost of solar and fuel cell energy additions. You can learn much more about tax breaks for energy savings at the Department of Energy website at energy.gov. Some states may also give tax credits for energy saving efforts. And number eight, the alternative motor vehicle credit. This is available to the original purchaser of a new qualifying vehicle. So don't miss out on a tax credit for any new hybrid you've purchased. I'll include links in the show notes to qualified models and the tax credit amounts. Please note that this is not a complete list of tax credits. There are others available to eligible taxpayers, such as the adoption credit and the credit for the elderly or the disabled. Some tax credits are refundable, which means that they could lower your taxes below zero to the point that you would receive a refund. Or if you're already getting a refund, some tax credits would increase that amount. Be sure to refer to the official IRS website for more information at irs.gov. I'm glad you're listening. If you haven't taken the MoneyGirl survey yet, please go to moneygirl.quickanddirtytips.com. You'll find the link on the left sidebar. It's a very short survey designed to help me improve the show and understand what financial topics are most important to you. Cha-ching! That's all for now. Courtesy of MoneyGirl, your guide to a richer life.