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TAX CREDITS

TAX CREDITS. MELINDA PHUONG HCCA. Tax Credits vs. Tax Deductions. Tax Deductions: Reduce Taxable Income Tax Credits: Money that can be offset against a tax liability. Non-Refundable vs. Re-fundable Credits.

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TAX CREDITS

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  1. TAX CREDITS MELINDA PHUONG HCCA

  2. Tax Credits vs. Tax Deductions • Tax Deductions: Reduce Taxable Income • Tax Credits: Money that can be offset against a tax liability

  3. Non-Refundable vs. Re-fundable Credits • Non-Refundable: Can Reduces Tax Liability all the way down to Zero. Anything in excess is not eligible for refunds • Refundable: Clients may receive money from the amount it exceeds their tax liability

  4. Child Tax Credit (CTC) • Non-Refundable Credit • The Child Tax Credit allows lower-income parents to claim as much as $1,000 for each child under age 17. • Reduce their federal income tax liability to zero

  5. How can you qualify? • Son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. • Support Test • Residence Test • Must be a US Citizen

  6. Special Rules to the CTC • If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you qualify for the additional CTC • Available to families to get a refund from whatever amount is not used for taxes. • 15% of earned income and your earned income must be more than $3,000

  7. Child and Dependent Tax Credit • Non-refundable • This credit allows working parents -- or those looking for work -- to report up to $3,000 of child care-related expenses per child, up to a maximum of $6,000 per family. • Families can receive up to 35% of their expenses as a credit • MUST BRING EIN OR SSN OF PROVIDER

  8. Rules for the Child and Dependent Care Credit • Qualifies for qualifying individuals under the age of 13, spouse or dependent that has lived with you for more than half the year or a dependent who is mentally or physically disabled • Married filing separately does not qualify for this credit • Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. • Payments can also not go to your child who is under age 19, even if the child is not your dependent.

  9. Earned Income Tax Credit • Refundable Credit • For people who work but do not have high incomes • Must have wages or a qualifying child

  10. Income requirements for EITC • $45,060 ($50,270 married filing jointly) with three or more qualifying children • $41,952 ($47,162 married filing jointly) with two qualifying children • $36,920 ($42,130 married filing jointly) with one qualifying child • $13,980 ($19,190 married filing jointly) with no qualifying children

  11. Tax Credit Amounts • $5,891 with three or more qualifying children • $5,236 with two qualifying children • $3,169 with one qualifying child • $475 with no qualifying children

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