Categories
Uncategorized

Reducing Taxes Owed With Credits

While tax deductions reduce your taxable income, tax credits come directly off what you owe the IRS—dollar for dollar. The Internal Revenue Code provides for several tax credits, from the child tax credit for each of your child dependents to the earned income tax credit, which is designed to provide refunds to low-income taxpayers and families with children.

Refundable tax credits can sometimes result in if any balance is left over after reducing the tax you owe to zero.

You might have owed the IRS $1,000 had you not claimed a $1,500 tax credit. The credit would erase your tax debt and the IRS would send you a refund for the $500 balance if the credit was one of those that are refundable. The IRS would keep that $500 if the credit you claimed was one of the nonrefundable ones, but at least it would erase your tax debt.7

Each credit comes with its own qualifying rules, and how you can claim them varies a little as well. For example, you can claim the Child Tax Credit directly on line 13a of your Form 1040 tax return if you qualify, but others must be claimed on Schedule 3, which must accompany your 1040. You would then enter the totals from Schedule 3 on lines 13b or 18d of your Form 1040.

Some tax credits, such as the Additional Child Tax Credit, require their own forms that help you calculate how much you’re entitled to and show the IRS how you arrived at that amount.

The qualifying rules for tax credits, particularly the earned income credit, can be complex, so consider checking with a tax professional to be absolutely sure you can claim them. But reputable tax preparation software can also be helpful, asking you a series of questions to determine if you qualify.

2 replies on “Reducing Taxes Owed With Credits”

Hello! I know this is kind of off topic but I was wondering which blog platform are you using for this website? I’m getting fed up of WordPress because I’ve had problems with hackers and I’m looking at options for another platform. I would be great if you could point me in the direction of a good platform.

Thank you sharing these types of wonderful blogposts. In addition, the optimal travel and also medical insurance plan can often eliminate those considerations that come with traveling abroad. Any medical crisis can soon become very costly and that’s guaranteed to quickly decide to put a financial burden on the family’s finances. Putting in place the suitable travel insurance package deal prior to leaving is worth the time and effort. Cheers

Leave a Reply

Your email address will not be published. Required fields are marked *