What is a Tax Credit and Who Can Claim Them?

Many seniors ask 'What is a tax credit?' and wonder if they can claim them too. You may be surprised at what you qualify for already.

What is a Tax Credit?

A tax credit is a form of tax relief that can help taxpayers of all ages keep a bit more money in their pockets. Some are designed to encourage certain behaviors, such as upgrading to energy-efficient appliances or living in a certain area of your state. Others are issued in hopes of stimulating the economy or helping consumers through rough economies.

Whatever the reason a tax credit is issued, it’s the consumer’s responsibility to find out about the opportunity and file the proper paperwork to take advantage. This means that many people give up money every year because they simply aren’t aware of the tax credits available. Even more important, they may not realize how many tax credits they qualify to receive.

I designed this website around one specific tax credit that provides valuable tax relief for seniors in Arizona, but I want to help you stay informed about tax credits for seniors in general. This page will help you understand what a tax credit is and who may qualify to fill out simple paperwork and receive more money in 2022 and beyond.

What is a Tax Credit vs a Tax Deduction?

There is a clear distinction between tax deductions and tax credits, but many people don’t fully understand the difference. If you’re going to maximize your chances to get money back from the state, you will need to know the following:

Tax deductions are used to lower your taxable income. For example, if you earn $40,000 in a year, you may apply deductions to reduce your taxable income to $35,000. This will reduce the amount of taxes that you owe the government at tax time. In some cases, it can eliminate your liability so much that you end up paying nothing or even receiving a refund.
Tax credits are different because they are applied directly to your tax liability, which is the amount of money that you owe the government after filing your taxes. Credits won’t reduce the amount of your earned income that is taxable, but they can help you eliminate your liability so that you’re more likely to receive a refund rather than owing money to the government.

The great thing about the Arizona Property Tax Refund Credit is that you don’t have to have taxable income to qualify for it. While a deduction is tied to your income, you don’t have that concern with this credit. Even if you have little to no income beyond your Social Security benefits, you can file for and receive a rental property tax credit refund.

Filing for a property tax refund credit is also far less complicated than filing your income taxes to report earned income. You fill out the required forms and stick them in the mail. There isn’t much more to it, and the most documentation you should need is your yearly income statements, and your lease agreement, and that too may not even be necessary to prove that you qualify for this form of senior tax relief in Arizona. In all my years of filing I have never had to use my lease agreement. Instead I present an accounting sheet or what I like to refer to in my eBook as a "resident ledger sheet" that's issued to me annually from my property manager's office at my request. I explain this accounting sheet in more detail in my eBook which you can purchase and download on this website for only $19.99. Just click to the right of this paragraph to learn more.

Who Qualifies for Tax Credits?

According to the IRS, every tax credit carries a different value for each consumer and comes with its own set of qualification terms. This means that you have to check your eligibility for every senior tax credit that you hear about. While this takes time and may increase the probability of some people receiving every credit that they’re entitled to receive, it allows the government to offer a variety of tax credits to people with different needs.

In terms of the Arizona Property Tax Refund Credit, the qualifications center on your age, income and housing situation. While property tax typically benefits property owners only, this tax credit is actually available to seniors who live and pay their own rent in Arizona without the benefit of government subsidies. If a portion of your rental payment includes property tax, then you need to learn more about this tax credit.

How to File for a Tax Credit

The paperwork required for each tax credit is different. Some credits are filed with your income tax while others allow you to file separate forms that has nothing to do with your income tax. The latter is the case for the Arizona’s Property Tax Refund Credit. You fill out a couple of forms that I can direct you to, and then you drop them in the mail and wait for your payment to arrive.

Of course, this is assuming that you have studied this site thoroughly to ensure that you will qualify to receive the tax credit. You don’t need to earn a lot of money to receive this credit. In fact, the less you earn each year, the more likely you are to qualify for this credit. While this is a tax credit that benefits seniors of low-income status, it doesn’t benefit those who receive subsidies for housing. For instance, if you receive tenant-based Section 8, or receive rental assistance from a subsidy program, or are in a low-income tax credit program, I can tell you now that you don’t qualify. This is unfortunate, but I don’t make the rules.

What is a Tax Credit and Who Can Claim Them?