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Additional Child Tax Credit
The Additional Child Tax Credit works with the Child Tax Credit. When you are unable to use the full $1,000 per child credit because your Child Tax Credit is limited to your tax liability, you may be eligible to receive the Additional Child Tax Credit. You must have $3,000 in taxable wages or self-employment income to qualify for the credit. Military members who are in a combat zone should add their combat pay to the credit calculations to make sure they are getting the highest possible credit. Any credit amount not applied to your other taxes may be added to your refund.
The Credit for Qualified Adoption Expenses, or the Adoption Credit, is a nonrefundable credit based on the amount of qualified adoption expenses you paid to adopt a child. Each dollar spent on adoption, up to $13,570, is included in the credit. If you claim a special needs child, you may claim the full credit regardless of your expenses. This credit is available for each child you adopt as long as the child is not your spouse's child or a child from a surrogate mother. The credit is nonrefundable so you can only zero out your income tax liability with it. Any remaining credit may be carried over for up to five years.
American Opportunity and Lifetime Learning Credits
The American Opportunity credit is a per student credit that allows a credit of 100% of the first $2,000 of tuition and fees paid and 25% of the second $2,000 spent. Students must be attending school more than half time, in a degree or certificate program, in their first four years of college, university, or trade school and must be free of any felony drug convictions. The American Opportunity credit is both nonrefundable and refundable so 60% of the credit can be used to reduce taxes to zero only and any remaining credit from that portion is lost. The remaining 40% of the credit can be added to refund once the taxes are reduced to zero.
The Lifetime Learning credit is a nonrefundable credit of 20% of the amount paid in tuition and fees to attend any college or trade school. Students don’t have to be enrolled in a degree or certificate program, attend half-time, or be in their first four years of school. You can even use this credit for the costs of graduate courses. The maximum credit of $2,000 covers all eligible students on the tax return. The Lifetime Learning Credit can only be used to zero taxes with any remaining credit lost.
Child and Dependent Care Expenses
This is a nonrefundable credit and can only be used to reduce or eliminate any taxes. The credit is calculated based on your dependent care expenses and your income. The maximum allowed expenses for the credit are $3,000 for one child and $6,000 for more than one child. The credit is a percentage of the expenses based on your income with the maximum credit is $1,050 for one qualifying child or $2,100 for more than one child.
Child Tax Credit
You may qualify for a credit of up to $1,000 per qualifying child. A qualifying child is an individual who is under age 17 at the end of the year, is claimed as a dependent, and meets the definition of a child under the Uniform Definition of a Child as a son, daughter, stepchild, adopted child, grandchild or eligible foster child.
Excess Social Security Tax or Railroad Retirement Tax Withheld
The annual amount of Social Security taxes are increased annually for inflation. This year’s maximum is $7,886.40. If you worked for one employer and had more than the maximum tax withheld, you must contact your employer for a refund of the overpayment. If you worked for more than one employer and the combined total of your social security taxes is greater than the maximum amount, you may claim the excess taxes paid as a refundable credit on your tax return. A refundable credit can be used to increase your refund.
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Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778