Tax credits are sums of money subtracted from the amount of taxes that an individual pays to the government. Claiming tax credits or rebates allows the taxpayer to decrease the amount of money he or she owes — or increase the amount that he or she is refunded — when it is time to file taxes. The most useful tips for claiming tax credits maximize the total reduction in the amount of taxes paid. A taxpayer who hopes to claim tax rebates should consider the following before filing: family circumstances, current tax laws and the method of filing his or her tax return.
Claiming tax credits is important for all taxpayers, but they are particularly important for individuals who have limited financial resources. Many countries and local governments primarily allocate tax credits to taxpayers living near or below the poverty line. Keeping accurate financial records during the year can help one determine tax refunds for which he or she qualifies. This common sense practice will also help prevent a government audit.
Most governments create tax rebates that will support families, encourage college attendance and otherwise enhance the individual's quality of life. Having a child, enrolling in a university, buying a home and many other life changes can make a formerly ineligible taxpayer eligible for a tax credit. Before a taxpayer files his or her return, he should make a list of any major lifestyle changes within the past year.
It's not uncommon for tax laws to change several times within the same year. Most individuals don't have the time or energy to relearn the tax code every year. Failing to do the proper research might cost a significant amount of money.
Many taxpayers use updated software or tax websites to file their tax returns. In most cases, new rebates and changes to existing rebates are accounted for by the software of website. Filing taxes and claiming tax credits online is easy using websites designed for that purpose.
Filing one's taxes on time or early is highly recommended. Some tax credits remain the same from year to year, but others are reduced after a certain date. Sometimes politicians will approve a tax credit or even a set of tax credits with the intent of stimulating certain sectors of the economy. After the desired effect is achieved, the tax rebate often is discontinued. Filing one's taxes early increases the probability that he or she will receive the maximum tax credit available.
Whichever method is used to file taxes, whether by mail or online, one should never artificially inflate tax credits. Government tax departments consistently investigate potential fraud. Those who are caught are punished with fines or even jail time.