Refundable Tax Credits

When filing your income taxes each year, you may seek to lower the amount of taxes you owe, seek the largest possible refund, or avoid paying more in taxes than you are legally required to pay. Tax credits can help accomplish all of these objectives. Typically, there are two types of tax credits available to taxpayers- refundable and nonrefundable. The majority of tax credits are non-refundable, meaning that any excess amount expires the year in which it is used, and is not refunded to you. However, there are refundable tax credits available, which may allow you to receive or increase your tax refund. Not everyone is eligible for refundable tax credits. There are specific criteria you must meet to qualify for refundable tax credits, as laid out by the IRS.

Here are some common examples of refundable tax credits:

Earned Income Tax Credit

The Earned Income Tax Credit is a benefit for working parents with low to moderate annual incomes below about $39,300 to $53,500. A person must be at least 25 years old and younger than 65 to qualify. The amount of credit you receive depends on a recipient’s income, marital status, and the number of children they have. You can’t claim EITC if your filing status is married filing separately.

 American Opportunity Tax Credit

The American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

 The Child Tax Credit

With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17. A qualifying child for this credit is someone who meets the qualifying criteria for six tests: age, relationship, support, dependent, citizenship, and residence. The credit is limited if your modified adjusted gross income is above a certain amount.

 Child and Dependent Care Credit

If you are paying someone to take care of your child or another person in your home while you work, you may be eligible for the child and dependent care credit. You may not take this credit if your filing status is married filing separately.

To qualify for the child and dependent care credit, you must have paid someone to care for one or more of the following people:

  • A child age 12 or younger at the end of the year whom you claim as a dependent on your tax return
  • Your spouse, if that person is unable to take care of himself or herself, and has lived in your home for at least half the year
  • Any other person claimed as a dependent on your return, if that person can’t take care of himself or herself, and has lived in your home at least half the year

 Contact An Atlanta Tax Attorney Today

If you need help with tax planning, contact Jeff Cohen, an experienced tax attorney today. You may be eligible for tax credits you were unaware of. To schedule a Free Phone Consultation and case evaluation in Atlanta, please call our office today at 404-937-1414. You may also schedule a consultation online. 

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