Tax Credits That You Should Not Forget

What is the purpose of tax credits. The purpose of tax credits is to reduce the amount of tax. Credits can reduce your tax liability to 0 while other credits are refundable which mean that they can produe a refund. One of the most popular refundale tax credits is the Eaned Income Credit (EITC). Each year many taxpayers often overlook various tax credits even if they qualify.

Here is a list of some of the new tax credits available in 2008.

First Time HomeBuyers Credit (NEW)

As was mentioned previosly, this credit applies to first time homeowners who purchased their home during the time period of April 8, 2008 to December 31, 2008. A first time homeowner is anyone who did not own their main home in the prior three years. This credit of $7,500 acts like a 15 year interest free loan. The credit must be claimed on Form 5405.

Recovery Rebate Credit (NEW)

The Recovery Rebate Credit is a onetime credit for people who didn't receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion. The amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. The IRS provides online assistance that helps you calculate the amount of your credit