As most seniors’ head toward retirement, their financial planning may often fall short. With the ever-increasing expenses, they may not have enough funds for a comfortable life, but there is one rebate. The availability of several tax breaks for retirees and seniors makes it easy for them to save and cut down on taxes on their income. This article covers important pointers about tax credit, a helpful tax break for seniors and retirees:

The working of tax credit
To understand this tax break for retirees and seniors, let’s look at how it works. As opposed to deductions that help you reduce the taxable income, tax credit is a reduction done on a dollar-for-dollar basis. In case you are eligible for a $2,000 tax credit, the tax bill will be reduced with that amount, irrespective of the effective tax rate.

Eligibility
To be eligible for a tax credit, you have to meet either of the following criteria:

• Be 65 years of age or older by the time the tax year in which you are claiming credit ends.
• Get retirement based on a total and permanent disability with a provision of taxable disability income. Even if you do not opt for a formal retirement, you can be considered retired due to disability in case your condition deems you unfit for work.

Income limit required
A tax credit can reduce financial woes, but you are not eligible to file for credit if you are earning over a certain limit. The income limits you should be acquainted with to know whether you are eligible for this tax break for retirees and seniors are listed here:

• For singles and qualifying widows/widowers as well as for the head of household, the income limit is $17,500
• If only one person in a married couple qualifies for a tax credit, the income limit is $20,000
• For a joint married return, the limit is capped at $25,000
• For those who have lived away from their spouse for the entire year and choose to file a separate married return, the income limit is $12,500 or more

The process of claiming your tax credit
Eligible seniors may be able to qualify for credit worth anything between $3,750 and $7,500. Some types of credits are refundable, meaning that even if you reduce the amount to a negative value, you will receive a check covering the difference. On the other hand, a tax credit is non-refundable, so you can only reduce the entire liability to zero.

While tax credit is one of the most important tax breaks for retirees and seniors that you must not overlook, it is also important to remember that these laws are subject to periodic changes. So, it is best to consult a tax expert who can help you understand the intricacies and save up on your income as much as possible.