These credits can reduce your tax liability to zero but do not provide you with a refund. Here are some examples:
- Child Tax Credit: There are seven tests to help determine if your child is eligible. These tests include age, relationship, support, and residence. If the tax credit you are entitled to exceeds your tax liability, the amount of tax you pay will be zero, but you will not receive any refund. In some cases, you may be eligible to take the Additional Child Tax Credit, which can be refundable.
- Elderly or Disabled Credit Credit: This tax credit for the elderly and disabled is available if you are over the age of 65 or if you are disabled. You must also be a U.S. citizen or a resident alien, and there are income limitations depending on the status you file your taxes under. For example, if you file as a single individual or head of household, you must have an adjusted gross income of $17,499 or less and must have less than $5,000 in non-taxable Social Security and pension income combined.
- Residential Energy Credits: You could be eligible if you have made improvements to your home with energy efficiency in mind. There is a Non-Business Energy Property Credit with a lifetime limit of $500 and a Residential Energy-Efficient Property Credit.
There are actually dozens of tax credits, and millions of taxpayers don’t even realize they are eligible for some of them. If you want to know more, do some research on the IRS website. However, most people would be well served by getting in touch with a reputable accounting firm in order to determine if they are eligible for specific tax credits.
For further questions about Phoenix personal income tax accounting, please contact Singer Tax & Accounting, PC today at (602) 482-8006.