Top 10 Overlooked Credits

Posted on October 25, 2018 by G & R Tax Services

Select an item from the list below:

Adoption Credit

Child and Dependent Care Credit

Child Tax Credit

The Additional Child Tax Credit

Earned Income Credit

Hope and Lifetime Learning Credits

Tuition and Fees Deduction

Retirement Savings Contributions Credit

Credit for Excess Social Security Tax or Railroad retirement Tax (RRTA) Withheld

Foreign Tax Credit

Adoption Credit

The maximum adoption credit is $12,970. The credit is phased out for taxpayers with modified adjusted gross income (MAGI) beginning at $194,580, and is completely phased out at MAGI of $234,580. The credit is NOT refundable. The credit for a special needs child is allowed for the year in which the adoption becomes final. No credit for a special needs child is allowed until the adoption becomes final.

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Child and Dependent Care Credit

*Amount is up to 35% of total qualifying expenses

*Only $3,000 of total qualifying expenses is deductible

*Daycare credit is given for children under age 13

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Child Tax Credit

2013 Tax Year Child Tax Credit amount will remain at $1000.00 per child under age 17. Refundable to extent 10% of taxpayer’s earned income in excess of $3,000 up to the per child credit amount, if total tax liability, minus nonrefundable credits taken.

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The Additional Child Tax Credit

You may receive less than the full amount of the Child Tax Credit because this credit is limited to your available tax liability. In certain cases, you may be entitled to an additional credit in excess of your tax liability. The additional child tax credit is available to taxpayers with an income greater than $3,000 and is A REFUNDABLE CREDIT!!!

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Earned Income Credit

The Earned Income Credit is a refundable credit for low-income workers with earned income. The credit is available for taxpayers with or without children. You could be entitled to a refundable credit of up to $3,250 (if you have one qualifying child), $5,372 (if you have more than one qualifying child), $6,044 (if you have more than two qualifying child) or $487 (if you have no qualifying children or no children at all). You have earned income if you work for someone else or if you are self-employed. Taxable earned income includes wages, salaries, tips, union strike benefits, long-term disability benefits received prior to minimum retirement age, and net earnings from self-employment. If you qualify for the Earned Income Credit, it reduces the tax you owe. The credit is refundable if your withholdings and earned income credit amount are greater than the tax liability you may have on your tax return.

**Qualified dependent must be under age 19 or under age 24 if full time student.

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American Opportunity Credit and Lifetime Learning Credits

The maximum Hope Credit increases to $2,500 per eligible student. The maximum Lifetime Learning Credit remains $2,000 per tax return. The phase-out range for the Lifetime Learning Credits is $100,000 – $120,000 if married filing jointly and $50,000 – $60,000 for all other filing statuses. The phase-out range for the Hope credit is $160,000 – $180,000 (MFJ) and $80,000 – $90,000 for all other filing statuses. If your AGI is over $90,000 ($180,000 for joint filers), you cannot claim the credit.

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Tuition and Fees Deduction

Instead of claiming the American Opportunity Credit or Lifetime Learning Credit, you can claim a tax deduction for qualified higher education expenses. You can take a deduction of up to $4,000 for qualified tuition and related expenses as an adjustment to income, even if you do not itemize your deductions. Certain restrictions may apply.

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Retirement Savings Contributions Credit

If you contribute to an IRA or an employer-provided retirement account, such as a 401(k), you may be eligible for a credit. The credit is based on up to $2,000 of your contribution for the year. You must be age 18 or older to claim the credit and you cannot be a student or claimed as a dependent on another’s return. The credit is in addition to any deduction or exclusion from income for the contribution.

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Credit for Excess Social Security Tax or Railroad Retirement Tax (RRTA) Withheld

The maximum social security taxes or RRTA tier 1 an individual must pay in 2012 is $4,624.20. If you worked for one employer and paid more than $4,624.20, 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 or RRTA is greater than the maximum amount, you may claim the excess taxes paid as a refundable credit on your tax return.

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Foreign Tax Credit

If your Form 1099-INT or Form 1099-DIV shows you paid foreign taxes, you may be eligible to claim either a credit or an itemized deduction for these taxes. Generally, the foreign tax credit results in a greater tax savings than deducting the foreign taxes as an itemized deduction.