There is a good reason why people like the tax credits? . Unlike tax deductions, which reduce your taxable income, tax credits reduce your tax bill dollar for dollar. However, all tax credits is the same. There are two different categories -. Non-refundable and refundable
Most tax credits are nonrefundable, which means they are subtracted from your income tax liability in the amount that you need
once your equals fiscal responsibility. zero, the unused credit expires and is no longer available to you.
the reverse is true for refundable credits. Any amount remaining after your tax liability is covered is refunded to you.
When completing your tax return this tax season, it is important to know which credits are available.
Let's take a close look at some of the most popular tax credits.
Earned Income Tax Credit (EITC).
qualifying for the EITC can be a big financial windfall because it is one of the most generous refundable credits there.
The maximum EITC for tax year (TY) 2015 is $ 503 if you have zero children living with you $ 3,359 if you have one child, $ 5,548 if you have two children and $ 6,242 if you have three or more children.
the more children you have living with you, the easier it is to qualify for the credit, and more credit you receive in general.
Although this credit is intended primarily for low-income households, you may be surprised by the amount of income you can earn and still qualify for at least some of the credit.
for example, the income threshold in 2015 is $ 20,330 if you are married filing jointly and have zero children living with you. There is $ 44,651 with one child, $ 49,974 with two children and $ 53,267 if you have three or more children in your home.
tax credit for children.
If you qualify, this credit allows you to reduce your federal tax on income up to $ 1,000 per child under 17 years
However, the credit is limited to amount of tax on your return, which means it is non refundable. It also phases out as your income exceeds $ 75,000 ($ 110,000 if filing jointly).
While the child tax credit does not reduce your tax bill below zero, forcing you to leave some of this money on the table, the tax credit additional children may be able to help.
This credit is refundable and allow you to keep some or all of your child tax credit used.
as an added bonus, you can always take the dependency exemption for the child even if you qualify
education credits
There are two credits .. the American Opportunity tax credit (formerly Hope credit) and the lifetime learning credit - available from different education.
American Opportunity tax credit can be the best deal for you because it is partially refundable.
If your eligible student qualifies, you get 100 percent of your first $ 2,000 in tuition and other fees back as credit and 25 percent of the next $ 2,000. This gives you a grand total of up to $ 2,500 in tax credits for each eligible student you claim on your tax return.
This is for the first four years of college.
The Lifetime Learning Credit is the best thing for the American opportunity credit.
He works with a wide range of choices for higher education and for a number of years. The credit is worth up to $ 2,000 on your tax return, but gradually as your income increases.
The two loans are charged to expenses you pay for yourself, your spouse and dependents.
foreign tax credit.
The foreign tax credit is a bit different than other loans because it helps you to avoid paying taxes on the money that has already been taxed.
If you earn income in another country, either through employment or foreign investment, you can pay taxes to a foreign government.
In this case, the IRS allows you to take credit for any tax paid abroad, so you do not have to pay tax on the same income twice.
Think you do not have foreign income? If you have international stocks or mutual funds, do not be too sure.
Check your brokerage statements for any tax paid abroad during the year.
Certain foreign income can be excluded from your US taxable income, but you can not take a foreign tax credit for taxes paid on excluded income.
Saver credit (formerly Retirement Savings Contributions Credit).
This credit is designed to encourage people to save. If you qualify, it is a real bonus - a credit of up to $ 1,000 in your pocket will
50% of the first tranche of $ 2,000 you put into an IRA or plan employer-sponsored .. If you file a joint statement, it is 50% of the first $ 4,000, or a credit of up to $ 00.
Only relatively modest means taxpayers benefit from this credit, however. It is completely eliminated when your income reaches $ 30,500 ($ 61,000 if filing jointly).
What are the credits you have saved the most money in the past?
0 Komentar