Tax Credits

Child Tax Credit

Tax credit of up to $2,000 per qualifying child

Requirements for the Child Tax Credit

Qualifying child

Under age 17 at end of the year

Must have a valid SSN

What does it mean when a tax credit phases out?

The credit is reduced or eliminated as income increases.

What is the credit for other dependents?

A tax credit of up to $500 for dependents who do not qualify for the Child Tax Credit. Used for dependents age 17 or older.

EX: 17-year-old child = $500 credit (not eligible for CTC)

EX: Elderly parent = $500 credit

Child and Dependent Care Credit

A tax credit for expenses paid for the care of qualifying person so the taxpayer can work or look for work.

Who qualifies for the Child and Dependent Care Credit?

Child under age 13

Disabled dependent of any age

EX: Parent pays daycare so they can work = eligible for credit

EX: Parent pays a babysitter while working = eligible for credit

What are the requirements for the Child and Dependent Care Credit?

Must be work related care expenses

Both spouses must work (if married filing jointly)

Earned Income Credit (EITC)

A refundable tax credit for low to moderate income taxpayers who have earned income.

What do you have to have to claim the EITC?

An earned income

Is ETIC Refundable or Non-Refundable?

Refundable

Are Child and Dependent Care Expenses Refundable or Non-Refundable?

Not fully refundable

Is the Credit for Other Dependents Refundable or Non-Refundable?

Non-refundable

Education Credits

Tax credits for qualified education expenses for higher education.

What are the two main credits for Qualified Education Expenses?

American Opportunity Credit (AOTC)

Lifetime Learning Credit (LLC)

EX: College student with tuition expenses = qualify for AOTC

EX: Adult taking classes = May qualify for LLC

Is American Opportunity Credit Refundable or Non-Refundable?

Partially refundable

Is Lifetime Learning Credit Refundable or Non-Refundable?

Non-Refundable

What is required to claim an education credit?

Must have qualified education expenses

Do Education Credits have income limits?

Yes - they phase out as income increases

Refundable vs. Nonrefundable

Refundable - can create or increase a refund.

Nonrefundable - only reduce taxes owed.