3 Tax Credits That Could Save You Thousands

Taxes can be a burden, no matter how much money you make. But the good thing about the U.S. tax code is that it's loaded with options designed to help filers save money.

If you're gearing up to file your 2023 taxes (remember, this season, you're filing taxes for the year before), you may be eager to squeeze out all the benefits you can. And to that end, it pays to see what tax credits you qualify for.

Now as a quick refresher, a tax credit differs from a tax deduction in that it's a dollar-for-dollar reduction of your tax liability. A tax deduction simply exempts some of your income from taxes, and the value of your deduction will hinge on the tax bracket you fall into.

To better clarify, here's an example. A $1,000 tax credit will shave $1,000 off of your tax bill regardless of your earnings or tax bracket. A $1,000 tax deduction will be worth $220 to you if you fall into the 22% tax bracket. For someone who falls into the 32% tax bracket, a $1,000 deduction will result in $320 of tax savings.

With that out of the way, there are some tax credits out there that have the potential to save you thousands of dollars on your 2023 taxes. Here are a few you should know about. Keep in mind that all credit values and income thresholds apply to the 2023 tax year, not the current year.

1. The Child Tax Credit

If you had children in your household under the age of 17 last year, you may be entitled to a $2,000 Child Tax Credit for each one. Now the Child Tax Credit is only partially refundable to the tune of $1,600. This means that if you're eligible for the credit for one child but owe the IRS no tax prior to applying the credit, you won't get the full $2,000 value, but rather, just $1,600. However, lawmakers are voting on a bill that could expand refundability for the Child Tax Credit for 2023.

Meanwhile, there are income limits associated with the Child Tax Credit. The credit begins to phase out if you earn $200,000 as a single tax-filer or $400,000 as a married filer with a joint tax return.

2. The Earned Income Tax Credit

The Earned Income Tax Credit, or EITC, is a credit designed to help low- and moderate income households. The amount of your credit will hinge on your income and the number of qualifying children you have in your household. There are also other restrictions -- for example, you can't have more than $11,000 in investment income.

You can use this table to determine whether you're eligible for the credit and what your credit might amount to:

One really nice thing about the EITC is that it's fully refundable. So let's say your household has three children or more and you're married with a joint income of $60,000. Even if you owe the IRS $0, you can still anticipate a credit in the amount of $7,430 for 2023.

3. The adoption tax credit

The cost of adopting a child can be substantial. The adoption tax credit is a non-refundable credit you can use to help offset the cost of bringing a child into your family.

The adoption tax credit has a maximum value of $15,950 for 2023. However, the credit does begin to phase out at an income of $239,230. And once your income exceeds $279,230, you lose the credit.

The credit applies to expenses that include:

• Adoption fees
• Court fees
• Attorney fees
• Travel expenses associated with your adoption

These are just some of the numerous tax credits that are part of the U.S. tax code. One thing you may want to do to ensure that you're claiming the right credits is work with a tax professional. They can help guide you through the filing process and make sure you don't lose out on money from the IRS that you're entitled to.