It doesn’t take a whole lot of planning and foresight to reduce your tax burden, but you have to do the work. Consider these credits and deductions to help you save at tax time. From job search expenses to gambling losses, don’t overlook these ways to cut your tax bill.
Know the tax laws
By spending a few hours each year keeping abreast of the tax law, you can save thousands of dollars on taxes over the years. Keeping a tax-reduction mindset in your everyday life will serve your finances well. If you owe $1,000 in taxes and receive a $150 tax credit, your taxes owed decrease to $850. That’s an extra $150 in your pocket. Here are 14 ways to reduce what you owe Uncle Sam.
Tax deductions vs credits
Not all tax breaks are alike. Be aware of the difference. A $500 energy tax credit might not seem like much, but it is what is known as an “above the line” item, meaning it lowers the amount of your tax bill on a dollar-for-dollar basis. Tax deductions are figured on your income tax rate. If you are in a 28 percent tax bracket, the tax deduction trims 28 cents from each dollar you deduct.
Breaking Down Your Taxable Income
The basic tax computation formula used in the U.S. has four main sets of parts that are broken down on the 1040. The formula is shown as follows:
All Sources of Taxable Income
= Gross Income
– Above-the-Line Deductions
= Adjusted Gross Income
– Standard or Itemized Deductions
= Taxable Income
– Tax Credits and Taxes Paid or Withheld
= Balance Due or Refund
- 1 Above-The-Line Deductions
- 1.1 Domestic Production Activities
- 1.2 Moving Expenses
- 1.3 Retirement Plan Contributions
- 1.4 HSA, MSA Contributions
- 1.5 Health Insurance premiums
- 1.6 Self-Employed Business Expenses, SE Tax
- 1.7 Alimony
- 1.8 Educator Expenses
- 1.9 Early Withdrawal Penalties
- 1.10 Student Loan Interest
- 1.11 Tuition and fees deduction
- 1.12 College and education
- 2 Itemized Deductions
- 2.1 State and Local Taxes – Tax deductions on taxes
- 2.2 Gifts to Charity
- 2.3 Home Mortgage Interest
- 2.4 Tax Preparation Fees
- 2.5 Medical and Dental Expenses
- 2.6 Gambling losses
- 2.7 Other types of savings and investment vehicles
- 2.8 Reinvested dividends
- 2.9 Business trips
- 2.10 Work from home – Home Office Expenses
- 2.11 Self-employment
- 2.12 Unreimbursed vehicle expenses
- 2.13 Appraisal Fees
- 2.14 Job Search Expenses
- 2.15 Refinance point deduction
- 3 Tax Credits
What Are Above-the-Line Deductions?
Every year, millions of taxpayers keep careful track of their charitable contributions, mortgage interest, property taxes and various other expenses in an effort to clear the dollar threshold that will allow them to claim the larger amount of their aggregated itemized deductions instead of having to settle for the standard deduction. However, some deductions can be taken regardless of whether the taxpayer is able to itemize. Expenses in this category are known as above-the-line deductions. Above-the-line deductions constitute those expenses that are deducted for AGI, while itemized deductions are deducted from this number. The “line” is the taxpayer’s AGI, which is the bottom number on the front of the 1040.
Domestic Production Activities
Up to 6% of activities related to the domestic production of certain goods or services (such as engineering or architectural) may be deducted under certain conditions.
The costs of transporting household goods from one residence to another are usually fully deductible, provided that they are not reimbursed by the taxpayer’s employer. The move must be made for work or business reasons, and the taxpayer’s new place of employment must be at least 50 miles further away from the taxpayer’s previous residence than the previous workplace was from there. So if you move to another town for a new job, the Internal Revenue Service (IRS) will let you deduct a portion of those expenses from your taxable income. But did you know that you can even deduct moving expenses if you’re self-employed? Or if you get fired from the job that you moved for in the first place? Yup, the IRS is uncharacteristically generous with this one, so take full advantage!
The IRS applies two basic “tests” to determine if you can deduct moving expenses: distance and time. First, the distance test: If you move for a new job — or even to find a new job — the new location must be at least 50 miles (80 kilometers) farther than the distance of your old commute. So if you used to drive 30 miles (48 kilometers) to work, the new location must be at least 80 miles (129 kilometers) from your old home. If you’re self-employed and work from home, then you only have to move 50 miles away, which can be as close as the neighboring city or town.
Now the time test: Once you move into your new location, you must be employed full time for at least 39 weeks of the next 12 months. What’s great about this is that you don’t have to work for the same company that brought you out to the new location. Even if you quit that job or get fired, you can still deduct the moving expenses if you get another job in the same geographical area that keeps you employed for the minimum 39 weeks. Note that if you’re self-employed, the time rule is more strict; you must remain employed full time for at least 78 weeks of the next 24 months after the move.
What exactly does the IRS let you deduct as moving expenses?
- Packing and shipping costs (moving company, for example)
- Up to 30 days of storage
- Travel to the new home, including gas at $0.24 a mile
- Hotel rooms, but not meals
- Disconnecting utilities at the old home and connecting new ones
Retirement Plan Contributions
All contributions made to traditional IRAs and qualified plans such as 401(k), 403(b) and 457 plans are deductible. Taxpayers with incomes above a certain level who contribute to both a traditional IRA and a qualified plan are subject to a graduated phaseout reduction on the deductibility of their IRA contributions. This deduction is not available for contributions to Roth IRAs or retirement plans of any kind.
Most retirement contributions (except to a Roth individual retirement account) allow you to deduct from your taxable income the amount paid into the retirement account. This reduces your total taxable income. Further, these funds grow tax-free until retirement. With a traditional IRA, users deduct contributions from their taxes and don’t pay anything on the earnings until the money is distributed. With Roth IRAs, after-tax money enjoys tax-free earnings.
One overlooked advantage of becoming self-employed, as many are in this era of non-retirement, is that you can use the SEP (Simple Employment Plan) to put 25 percent of your self-employment income up to $50,000 into a tax-advantaged employment plan. People who have had workplace plans often forget to set up their own.
HSA, MSA Contributions
All contributions to Health Savings Accounts and Archer Medical Savings Accounts are fully deductible. However, the taxpayer cannot have access to any kind of group policy coverage, including that offered by fraternal or professional organizations. The purchase of a qualified high-deductible health insurance policy is also required. The contributions unused for medical expenses can roll over indefinitely and grow tax-free (similar to the assets in a retirement account).
Health Insurance premiums
The cost of premiums paid for individual health insurance policies (including high-deductible policies) are fully deductible for self-employed taxpayers. As with HSAs and MSAs, the taxpayer cannot have access to group health coverage of any kind.
Self-Employed Business Expenses, SE Tax
Virtually any expense incurred in the operation of a sole proprietorship is deductible on Schedule C, such as rent, utilities, the cost of equipment and supplies, insurance, legal fees, employee salaries and contract labor. This also includes one-half of the self-employment tax that must be paid on this income. Although these expenses are not listed directly on the 1040 but are carried to the income section via the Schedule C, they are still considered to be above-the-line deductions because they are subtracted in order to determine adjusted gross income.
Payments made to a spouse pursuant to a divorce decree that are not classified as child support are usually counted as alimony. All payments of this type are deductible from gross income.
These include unreimbursed qualified expenses of up to $250 ($500 for joint filers if both are in this category). Qualified expenses include teaching equipment, supplies, books and other ordinary expenses that are commonly associated with education. This deduction is available for education professionals who teach grades K-12 and work at least 900 hours during the year.
Early Withdrawal Penalties
Any penalties paid for the early withdrawal of money from a CD or savings bond that is reported on Form 1099-INT or 1099-DIV can be deducted.
Student Loan Interest
The U.S. tax code is designed to encourage certain purchases and activities that strengthen society. Home ownership is one of those, and so is higher education. That’s why the Internal Revenue Service (IRS) lets you deduct the interest you pay on both home mortgage loans and student loans. But did you know that you can deduct the interest paid on student loans — even if you aren’t the person that’s paying it? If you qualify, you can deduct up to $2,500 in student loan interest every year.
As the IRS sees it, the person who is legally obligated to pay back a student loan has the right to deduct the interest [source: TurboTax]. In most cases, that person is the student. So even if your parents are the ones writing the check each month, you can still deduct that interest on your tax return.
With the IRS being the IRS, nothing is straightforward, so there are a few conditions that could potentially disqualify you from claiming the interest deduction on your tax return:
- If you’re claimed as a dependent on someone else’s tax return (your parents’, for example), then you cannot claim the deduction.
- If your modified adjusted gross income is greater than $75,000 for a single filer or $155,000 for a married couple filing jointly, then you can’t claim student loan interest as a deduction.
- If the loan is a Direct PLUS loan for parents or a similar loan in which your parents are legally obligated to repay it, then you can’t deduct the interest from that loan.
Tuition and fees deduction
In some cases, it is more advantageous for taxpayers to deduct the costs of tuition, fees and other educational expenses paid to qualified educational institutions rather than claim one of the educational tax credits for them. Those who are unable to qualify for these credits for any reason can take this deduction instead as well. Taxpayers taking a full course load and working toward a degree can receive education benefits through the American Opportunity Tax Credit for college expenses. But even those who just took one class to further their career may be able to take the tuition and fees deduction. With this credit, you can deduct up to $4,000 for tuition and fees, books and educational supplies for you, your spouse or your dependents.
College and education
College costs are usually not deductible, but there are tax credits for tuition and a limited deduction for interest on student loans. Up to $2,500 in interest can be deducted if your income is under $75,000, or $155,000 for a joint return. A college credit of $2,500 for tuition and related expenses is available if your income is $80,000 or $160,000 for joint filers.
Any or all of these deductions can be taken in addition to the itemized deductions for eligible taxpayers. Of course, there are also several incidental rules and limitations on most of these deductions that are not covered here. For more information on above-the-line deductions, read the instructions for the 1040 Form on the IRS website or consult your tax advisor. (To learn more, see The 10 Most Overlooked Tax Deductions.)
When you prepare your tax return, you have the option of claiming the standard deduction or itemized deductions. While the standard deduction is easier to claim, about one-third of taxpayers choose to itemize deductions instead. Usually, you will only itemize your deductions if their total is greater than the standard deduction.
Itemized deductions are claimed on Schedule A of Form 1040, which must be attached to your annual tax return. Here are some of the most popular itemized deductions available. (Note that the percentages mentioned are based on IRS data from 2013 tax returns.)
State and Local Taxes – Tax deductions on taxes
If you were subject to state/local income or general sales tax and you paid it during your tax year, you may claim this as an itemized deduction. These are referred to as “deductible non-business taxes.”
You can deduct state and local income taxes that were withheld from your wages during the year – these appear on your Form W-2 (Wage and Tax Statement). Or, you can choose to deduct state and local sales taxes (instead of state and local income taxes), but you cannot deduct both.
For the state and local sales tax deduction, you can either use your actual expenses (via saved receipts) or the “optional sales tax tables” provided by the IRS. See the Instructions for Schedule A (Form 1040) for more information.
The Internal Revenue Service (IRS) allows you to deduct state and local income taxes from your adjusted gross income during the same tax year. So if you pay $1,000 in state and local taxes in April 2009 for income earned in 2008, you can deduct $1,000 from your 2009 federal income taxes. But what if you live in a state like Florida, Texas or Washington that don’t collect state or local income taxes? The IRS gives these taxpayers — all taxpayers, really — the option of deducting state sales taxes instead. The IRS offers a handy sales tax calculator for estimating your deduction, but you can take even larger deductions if you buy a boat, plane or an airplane. You can deduct certain vehicle-related taxes. The purchase of a boat or a car in some states might generate sales tax that creates a larger deduction than income tax. For example, many states charge an annual registration fee for your car, truck, motorcycle, motor home or boat. This registration fee is really an extension of a sales tax, which is deductible as a personal property tax.
The deduction for state and local income taxes or sales taxes is claimed on Line 5 of Schedule A (Form 1040), in the section titled “Taxes You Paid.”
Over 95% of people who itemize claim one of the two, making it the most popular itemized deduction by far.
Gifts to Charity
If you make a charitable contribution to a qualified organization, you may be able to claim this as an itemized deduction. To find out if an organization is qualified, use the “EO Select Check” tool on the IRS website.
If you made a charitable donation via cash or check, you must keep a record of the contribution (including the date and amount). If you donated property, you can generally deduct the fair market value. For information about calculating the value of your noncash contribution, see IRS Publication 561 (Determining the Value of Donated Property).
Note that you can only deduct the amount that exceeds the fair market value of any benefit you received in exchange for your donation (such as merchandise or tickets to an event). Additionally, you must maintain records for any donation of $250 or more. The charitable organization should provide you with written acknowledgment of your contribution, including the amount of cash and/or a description of any donated property.
Charitable contributions made with payroll deduction, checks, cash and donations of goods and clothing are all deductible. Don’t forget to include the cash you give to the Salvation Army and the $20 you place in the collection plate at church each week. If you cleaned out your bulging closet and dropped off clothing or household goods at your favorite charity, this may be deductible on your tax return.
You can also deduct expenses incurred from volunteer work or other charitable activities. You can’t deduct your time, but they can write off related costs such as transportation and supplies. Let’s say you mentor a kid across town as part of the Big Brothers, Big Sisters program. You drive 20 miles (32 kilometers) every week to meet him at his apartment. You buy reading and math workbooks to complete together. Every month, you take him to the museum or the zoo or a children’s music concert. You have kids of your own, and sometimes you have to pay a babysitter to watch your own children while you mentor.
All of these out-of-pocket expenses support a volunteer activity with a tax-exempt charitable organization. So all of these expenses are deductible, including:
- Mileage to and from the mentoring appointments
- Books and other tutoring materials
- Tickets to museums, zoos and educational events
- Childcare expenses while you volunteer
To claim a deduction for your charitable contribution, complete Lines 16-19 of Schedule A (Form 1040), the section titled “Gifts to Charity.” If your deduction for a noncash contribution is more than $500, you must complete Form 8283 (Noncash Charitable Contributions) and attach it to your tax return.
Home Mortgage Interest
You can deduct the interest that you pay on a mortgage loan secured by your home. To be eligible, your debt must be secured by a qualified home (i.e. your main home or your second home).
In most cases, you are allowed to deduct all of your mortgage interest. How much you can deduct is based on the date and amount of your mortgage, and how you use the mortgage proceeds. Note that your deduction is limited to the interest on the portion of your mortgage debt that does not exceed your qualified loan limit. For more information, see Publication 936 (Home Mortgage Interest Deduction).
If you paid $600 or more of mortgage interest (including certain mortgage points and mortgage insurance premiums) during the year on any one mortgage, you should receive Form 1098 (Mortgage Interest Statement) from the mortgage holder. This statement will show your total payments for the year – including the mortgage interest, deductible points, and mortgage insurance premiums you paid.
Homeowners enjoy mortgage deductions, which can significantly reduce their tax burden, especially if they are in high tax brackets. As taxpayers age, they lose out on more and more tax deductions – the mortgage deduction fades away as homeowners pay off their mortgages, and parents of grown children who are no longer dependents give up those child-related deductions.
To claim a deduction for your mortgage interest, complete Lines 10-15 of Schedule A (Form 1040), the section titled “Interest You Paid.”
Over 75% of people who itemize claim a deduction for home mortgage interest.
Tax Preparation Fees
If you paid fees for the preparation of your tax return, you may be able claim this as an itemized deduction. This includes the cost of tax preparation software as well as any fee you paid to electronically file (“e-file”) your tax return. Deductible expenses and fees include your accountant’s fee, any software you purchased to help you prepare your taxes (Web-based services like TurboTax count), and even “how-to” books about taxes.
Tax preparation fees are classified as a miscellaneous deduction and are subject to a 2% limit. That means you can deduct the portion of your fees that exceeds 2% of your adjusted gross income (AGI). For more information, see IRS Publication 529 (Miscellaneous Deductions).
To claim a deduction for your tax preparation fees, enter the amount you paid on Line 22 of Schedule A (Form 1040), in the section titled “Job Expenses and Certain Miscellaneous Deductions.” Note that you must deduct the fees on your return for the year in which you pay them – for example, on your 2014 return, you can deduct the fees you paid in 2014 for preparing your 2013 return.
Over 48% of people who itemize claim a deduction for tax preparation fees.
Medical and Dental Expenses
If you have unreimbursed medical and/or dental expenses, you may be able to claim these as a miscellaneous itemized deduction. The deduction applies to most medical and dental costs that you pay for yourself, your spouse, and your dependents. However, if any of your costs were reimbursed by insurance or other sources, you cannot claim a deduction for those expenses.
Qualified medical expenses include payments for the diagnosis, prevention, treatment, or cure of disease – as well as payments for treatments that affect any structure or function of the body. These expenses are generally subject to a 10% limit (7.5% if you or your spouse were born before January 2, 1952), which means you can deduct the portion of your expenses that exceeds 10% (or 7.5%) of your AGI. For more information, see IRS Publication 502 (Medical and Dental Expenses). Not only are you allowed to claim out-of-pocket expenses from doctor’s office visits and medications, but also unconventional practitioners like chiropractors, acupuncturists, Christian Science practitioners, and pretty much anyone who can write a note saying that the treatment is medically necessary.
And don’t forget about travel expenses. You can deduct up to 24 cents a mile for driving back and forth from medical treatments, including meetings for programs like Alcoholics Anonymous. You can even deduct the cost of traveling to a conference about your specific medical condition, although the costs of meals and lodging are on you. If you have a child with a diagnosed learning disability, you can also deduct the cost of any special education programs and therapies, the mileage traveled to those therapies, and even the tuition costs for higher education programs specifically for people with learning disabilities.
To claim a deduction for your medical/dental expenses, complete Lines 1-4 of Schedule A (Form 1040), the section titled “Medical and Dental Expenses.” Keep in mind, you can only include the expenses you paid during that year and you can only use the expenses once on your return.
Taxpayers who weren’t so lucky gambling last year should know that losses can be deducted if they itemize their deductions. However, your amount of losses cannot surpass your winnings, which must be reported as taxable income. For example, if you have $2,000 in winnings and $4,000 in losses, your deduction is limited to $2,000. Make sure to collect documentation such as receipts, tickets and other records to support your losses.
Other types of savings and investment vehicles
In general, municipal bonds enjoy a triple tax exemption at the county, state and federal levels, which makes them a “great tax planning tool.” However, bonds will get hurt if interest rates go up (and default is also possible), so there is some risk involved.
Stocks enjoy other tax advantages, too, especially if you plan to pass them on to heirs. “You can buy a stock today, and it’s growing tax-deferred, and when you die, your kids can inherit it and get a step-up in basis,” which reduces their tax burden. The step-up in basis essentially counts the asset at its value at the time of inheritance, and not original purchase.
Investors, when calculating the cost basis after selling a financial asset, make sure to add in all of the reinvested dividends. That increases the cost basis and reduces your capital gain when you sell the investment.
Combine a vacation with a business trip and reduce vacation costs by deducting the percent of unreimbursed expenses spent on business from the total costs. This could include airfare and part of hotel bill (proportionate to time spent on business activities).
Work from home – Home Office Expenses
If you work for yourself or have a side business, don’t be afraid to take the home office deduction. This deduction allows you to deduct the percent of your home that is used for your business. If the guest bedroom is used exclusively for a home office and constitutes one-fifth of your apartment’s living space, you can deduct one-fifth of rent and utility fees for your home office.
Before we get too deep into this one, heed this warning: Home office deductions are a huge red flag for the Internal Revenue Service (IRS). The IRS has established a strict set of rules on home office deductions and too many taxpayers try to flaunt them. So unless you have a perverse love of audits, rein in your creativity on this one.
According to the IRS, a portion of following expenses may be deducted for a qualifying home office:
- Real estate taxes
- Mortgage interest
- Utilities (electricity, heat, water, gas, Internet service, telephone service, etc.)
- Painting and repairs
Again, the IRS is a stickler on this one. A qualifying home office is a part of the home that is used “exclusively and regularly” as the principle place of business. Ideally, it’s a separate structure from the living quarters of the house. If not, then it needs to be a place set aside exclusively for business purposes. People get into trouble when their bedroom doubles as their graphic design studio, or they work from home a couple days a week because the commute is too long. If you’re an employee who works from home, you must be required to work from home in order to make home office deductions. And the IRS will want to see proof of that in writing.
But if you already have a portion of your home set aside exclusively for business purpose, then you have the right to take as many deductions as you deserve. For example, if you regularly meet clients or customers in your home office, you can deduct the cost of repairs and maintenance — even landscaping — to the home that make it more presentable.
Self-employed individuals (either full time or part time) are eligible for scores of tax deductions. A few of those expenses include business-related vehicle mileage, shipping, advertising, website fees, percent of home Internet charges used for business, memberships, business-related travel, office supplies and any expenses incurred to run your business. Business owners have more choice and control over their taxes than anyone else. Business owners can keep money in the company to pay fewer taxes, as well as count certain expenditures as company expenses.
However, do a “meticulous” comb-over if you file a Schedule C as a self-employed worker. It’s well-known that audit rates are much higher for self-proprietors.
Unreimbursed vehicle expenses
If you drive miles to work every day in gridlock traffic, and then suffer through the same living hell on the way back home, the IRS won’t give you a dime for your troubles. For some strange reason, you can deduct all sorts of expenses when traveling for business, but not when traveling to and from your regular place of business. Unreimbursed vehicle expenses are another frequently overlooked tax break. You can’t deduct commuting costs, but if you travel to satellite offices or drive your own vehicle for business and aren’t reimbursed, you can deduct mileage costs.
A growing number of employers in America are participating in commuter benefit programs like the one operated by TransitChek. If your employer enrolls with TransitChek, you can opt to make pre-tax deductions from your monthly paycheck to cover commuter expenses. Those include everything from parking costs to bus passes to bicycle repairs. Since the money is withheld from your paycheck before taxes, it functions as a deduction from total taxable income.
Another deduction that falls under the two-percent limit has to do with appraisals. If you are donating a particularly expensive item to a charity or tax-exempt institution, the IRS requires a professional appraisal to determine its fair market value. You can’t include the cost of the appraisal as a charitable contribution, but you can deduct the appraisal fee as a miscellaneous itemized deduction [source: Internal Revenue Service]. The same is true for property that is damaged in a storm. The IRS requires an appraisal to assess the extent of the “casualty loss” for tax purposes. Again, the appraisal fee is deductible.
Job Search Expenses
If you’re looking for a job in the same field, you can deduct all related expenses as miscellaneous expenses if you itemize (they must pass a 2 percent threshold). You can deduct these expenses even if you didn’t find a new job. Job search expenses such as preparing and sending résumés, fees to placement agencies and even travel related to the job search can be included. Even costs associated with an exploratory visit to a potential employer can be a deductible item. It’s worth keeping track of all professional visits that might be considered job prospects. The IRS allows 56.5 cents per mile if you drive. But career re-inventors beware: One of the quirks of the tax code is that job searches outside your present line of work cannot be deducted.
Childcare deductions and flexible spending plans. People often avoid this one because of the paperwork and hassle of paying “on the books” for a few hours of childcare here and there. But there are allowances that make it worth the effort. The childcare credit, an above-the-line item, reduces taxes by 20 percent to 35 percent of the first $3,000 spent for one child or $6,000 for two, depending on your income level. That credit can be used for parent care, too. The IRS also allows up to $5,000 for workplace flexible spending of pre-tax dollars for nannies, after-school care, and even day camps.
Parents can also take advantage of other tax benefits, such as 529 college savings plans where money can grow tax-free and pre-tax flex spending accounts for child care costs.
Refinance point deduction
In this year’s big wave of mortgage refinancing, most loans no longer require payment of points, the upfront interest charges assessed at the start of a home loan. But some people forget to take a deduction on points they still pay for previous mortgages. When you extinguish your old loan, you repay remaining points all at once. That amount is entirely deductible.
Retirement saver’s credit
This credit is often overlooked and seldom talked about. If you have an income up to $29,500 ($59,000 for married filing jointly), you can save for retirement and get a tax credit worth up to $1,000 for individuals and $2,000 for couples if you contributed to a qualifying retirement plan such as an individual retirement account or 401(k). The retirement saver’s tax credit is a win-win situation since contributions to your IRA may also be a deduction from income.
American Opportunity Tax Credit
With the American Opportunity Tax Credit, you receive a tax credit on 100 percent of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000 for a maximum of $2,500 per student. That’s $2,500 deducted from the amount of tax owed (as long as you meet certain requirements).
Lifetime Learning Credit
The Lifetime Learning Credit is great for adults who are boosting their education and training. This credit is worth a maximum of $2,000 per year (up to 20 percent of up to $10,000 spent on post-high-school education) and helps pay for college and educational expenses that improve your job skills.
Earned income tax credit
The Earned Income Tax Credit lowers the overall tax bill for low- and moderate-income working families.
The earned income tax credit is a refundable tax credit given to filers who earn low to moderate income from their jobs. The credit can be worth up to $6,044, depending on your income and how many dependents you have, but one in five tax filers overlook this opportunity, according to the Internal Revenue Service. You must file your taxes to get it, so even if you make less than $10,000 (the minimum income filing requirement), you should still file your taxes.