Tax credits offer a way to reduce the tax you owe, so it’s important to make sure you’re claiming them correctly on your tax return. While you want to claim all of the tax credits you are eligible for, you also want to avoid claiming credits you are not qualified for. This helps avoid tax problems down the road!
There are many different kinds of tax credits available to individual taxpayers. Just a few of these include:
- Adoption Credit
- Child and Dependent Care Credit
- Child Tax Credit
- Earned Income Tax Credit
- Residential Energy Efficient Property Credit
- Lifetime Learning Credit
- Saver’s Credit (Retirement Savings Contributions Credit)
All credits for individual taxpayers fall into two categories: refundable and nonrefundable. Nonrefundable tax credits reduce the amount of tax you owe, but do not provide you with a refund if the amount of your tax credits exceeds the tax you owe. Refundable tax credits reduce the amount of tax you owe, and if the amount of your tax credits exceeds the amount of tax you owe, you receive a refund for that amount.
If you have questions about what tax credits mean for your tax return this year, or whether a specific credit is refundable or nonrefundable, don’t hesitate to ask. The Taxation Solutions, Inc. team is happy to provide all of the tax help you need to minimize your tax and maximize your IRS compliance. Contact us now to learn more.