Two of the most valuable forms of tax relief the federal government offers to taxpayers are tax credits and exclusions. More often than not, each credit or exclusion requires you to satisfy certain eligibility criteria before claiming it.Frequently, the eligibility criteria require you to have income below certain levels. If you make $30,000 per year, then there is a wide range of tax relief available to you.
Earned Income Credit
As long as you claim one child as a dependent, your $30,000 of earnings satisfies the income criteria for claiming the Earned Income Tax Credit, regardless of your filing status. The IRS offers the credit specifically for taxpayers who earn their income from work activities, whether it be for an employer or your own business. The amount of credit you qualify for will depend on your particular circumstances. The instructions to Form 1040 and 1040A will include a worksheet for you to calculate the amount for which you qualify.
American Opportunity Credit
The IRS allows you to claim the American Opportunity Tax Credit for some of your education-related expenses as long as your income is under $80,000 or $160,000 if filing a joint return. When you earn $30,000 per year, then you easily satisfy these income requirements to potentially claim the maximum credit of $2,500. However, there are other requirements you must satisfy. The credit only covers the tuition, fees and course-related books and equipment of students who are in one of the first four years of post-secondary education. The student must also enroll in the school at least half-time for one academic period during the tax year and be pursuing a recognized degree. If you pay these expenses for yourself, your spouse or one of your dependents, then you need to fill out a Form 8863 with your tax return to claim the credit.
As added incentive to save for your retirement, the IRS allows you to claim a tax credit for some of the contributions you make to retirement accounts, such as a Roth or traditional IRA. Since this tax credit is in addition to any deduction you claim for retirement account contributions, the IRS imposes relatively low Adjusted Gross Income limitations. Although the threshold changes each year, as of the time of publication, the credit is only available to single taxpayers with an AGI of $27,750 or less, head of household filers with AGI of $41,625 or less and to joint filers with a maximum AGI of $55,500. Even though you earn $30,000 per year, you can still qualify as a single taxpayer if you take at least $2,250 in income adjustments, which will bring your AGI down to $27,750.
Foreign Income Exclusion
If you earn $30,000 while living and working in a foreign country, you may qualify for the foreign earned income exclusion. This exclusion increases each year for inflation. As of the time of publication, the IRS allows eligible taxpayers to exclude up to $91,500 of foreign earnings from income tax. However, in order to qualify, you must be living and working in a foreign country indefinitely for at least 330 days of the tax year.