The Daily Deduction

These Tax Credits Could Reduce Your Tax Liability

There are two types of credits: non-refundable and refundable. A non-refundable tax credit can reduce the amount of federal income tax you owe for the entire tax year to zero – but not beyond that. 

Example: You owe $850, but you qualify for a $1,000 non-refundable tax credit.  This tax credit could reduce your liability down to $0, but not into the negative where you would receive a refund.

A refundable tax credit will pay excess beyond your tax liability. So if that $1,000 credit was a refundable tax credit, that particular credit could grant you a $150 refund.

When you file your taxes in the next couple of weeks, keep these popular credits in mind.

Child Tax Credit

 

Who qualifies?

An Individual or couple claiming dependent children under age 17

Maximum Credit:

$1,000 per child

Refundable?

No, with the exception of certain low income families

 

Child & Dependent Care Tax Credit

 

Who qualifies?

Expenses for child and dependent care so you can go to work

Maximum Credit:

Varies based on income; up to 35% of your qualifying costs for care and aps at $3,000 for one qualifying individual (child under 13) and $6,000 for two or more qualifying individuals.

Income Limitations:

There is no maximum income limit to be eligible for the credit

Refundable?

This credit is non-refundable

 

Earned Income Tax Credit

 

Who qualifies?

Employed individuals with a low to moderate household income.

Maximum Credit:

Depends on the number of children: $6,044 with three or more qualifying children; $5,372 with two qualifying children; $3,250 with one qualifying child; $487 with no qualifying children.

Income Limitations:

This credit has Earned Income and AGI restrictions and depends on the number of qualifying children that you have.

Refundable?

Refundable

 

 

Posted To: The Daily Deduction By: Lauryn on 4/12/2014 12:50:00 AM
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