Planning Ahead for Tax Credits and Deductions

Planning Ahead for Tax Credits and Deductions

Everybody wants to pay as little in taxes as possible. Most people use software or hire an accountant to help them find all the deductions they can subtract from their taxable income and all the credits they can subtract from their final bill. But most tax breaks require you, the taxpayer, to plan ahead. Even the most skilled accountant can’t deduct a charity donation from your income if you forgot to save the receipt. Here are some tips from the IRS about year-round tax planning:

Child tax credit

To qualify for advance child tax credit payments, you — and your spouse, if you filed a joint return — must have:

  • Filed a 2019 or 2020 tax return and claimed the child tax credit on the return; or
  • Provided the IRS with your information in 2020 to receive the economic impact payment using the Non-Filers: Enter Payment Info Here tool; and
  • Resided in your main home in the United States (the 50 states and the District of Columbia) for more than half the year or have filed a joint return with a spouse who has a main home in the United States for more than half the year; and
  • A qualifying child under age 18 at the end of 2021 who has a valid Social Security number; and
  • Made less than certain income limits.

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