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 |