9 Popular Tax Credits - WBCB: The Valley's CW |

9 Popular Tax Credits

Posted:

MoneyTips

While many deductions were cut or modified with the Tax Cuts and Jobs Act (TCJA) of 2017, most tax credits were retained. Tax credits are more powerful than tax deductions because they directly subtract from your tax bill (deductions only reduce taxable income). Refundable tax credits are even better, since refunds can be greater than your tax bill.

Explains Betterment Head of Tax Eric Bronnenkant, "Credits are, in general, more valuable than deductions, because they reduce your taxes dollar-for-dollar." Do you qualify for any of the following nine tax credits?

1. Earned Income Tax Credit (EITC) One of the most popular and powerful tax credits available to low-income families, the EITC allows up to $6,431 in refundable credits (for married couples filing jointly) for those who have three or more qualifying children.

2. Child Tax Credit (CTC) In exchange for eliminating personal deductions, the TCJA doubled the child tax credit that's non-refundable to $2,000 per qualifying child under age 17. Modified adjusted gross income (MAGI) phaseouts were also increased to $200,000 for single filers and $400,000 for married filing jointly.

3. Credit for Other Dependents The TCJA created a new $500 non-refundable credit for dependents who are not otherwise qualified for the CTC including dependent children beyond the age of 16 and elderly parents/grandparents.

4. Additional Child Tax Credit (ACTC) The ACTC is a refundable supplement to the CTC for those who don't owe enough taxes to claim the full CTC credit. It allows qualifying taxpayers to claim up to $1,400 in additional credits that extend beyond the taxes that they owe. You'll need Schedule 8812 to see if you qualify.

5. American Opportunity Credit (AOC) This credit may be claimed against qualified education expenses up to a $2,500 annual limit per qualifying student and the AOC can be partially refundable (up to 40%).

6. Lifetime Learning Credit (LLC) If you're not qualified for the AOC, the Lifetime Learning Credit is a non-refundable credit allowing up to $2,000 in credits per return (not per qualifying student).

MAGI limits and phase-outs apply to both education credits. For details on qualifications and differences, see the IRS Form 8863 Instructions.

7. Retirement Savings Contribution Credit This "saver's credit" allows you to claim credits for up to 50% of contributions to an IRA or employee-sponsored plans like a 401(k). This credit phases out at a MAGI of $31,500 for single filers or $63,000 for married filing jointly.

8. Adoption Credit You may claim a credit of up to $13,810 per eligible child in qualified adoption expenses in 2018 and if the adopted child is a special-needs child, you may be able to claim the credit even if you didn't pay qualifying adoption expenses in 2018.

9. Net Premium Tax Credit This refundable credit applies to premiums for health insurance purchased through the health insurance marketplace. It's designed to help lower-income families afford insurance. Qualifying taxpayers must fill out Form 8962 to claim their credit.

Other credits may be found in two new forms Schedule 3 (non-refundable) and Schedule 5 (refundable). For more details, see the Schedule instructions toward the end of the new 2018 Form 1040 instruction booklet.

Some credits are in limbo, such as the recently expired Nonbusiness Energy Property Credit for homeowners who upgraded their homes with energy-efficient exterior windows and doors, added insulation, or other qualified high-efficiency installations. The IRS suggests checking their legislative updates page for any late-breaking changes in tax law.

Take advantage of all tax credits that you can to reduce your tax bill but don't forget deductions. The TCJA may have adjusted deductions to make the standard deduction a more tempting choice, but itemizing may still be the right choice for you.

Failing to pay your taxes or a penalty you owe could negatively impact your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.


Photo iStockphoto.com/designer491

Advertising Disclosure

Originally Posted at: https://www.moneytips.com/9-popular-tax-credits

Do You Qualify For An Earned Income Tax Credit?

Top 7 Tax Deductions And Credits That People Forget

Deduct Your Student Loans!

Information contained on this page is provided by an independent third-party content provider. Frankly and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact pressreleases@franklyinc.com

Powered by Frankly
Powered by WorldNow
All content © Copyright 2000 - 2019 WBCB. All Rights Reserved.
For more information on this site, please read our Privacy Policy, and Terms of Service, and Ad Choices.