Credits & Deductions

  • Child Tax Credit
  • Earned Income Credits

  • Education Credits Forms: 1098-T and 1098-E

  • America Opportunity and Lifetime Learning Credits

  • Tax Tips



CHILD TAX CREDIT

The Child Tax Credit (CTC) can highly benefit your family by allowing you to receive up to $1,000 per qualifying child depending on your income.

A qualifying child must:

  • be under the age of 17 at the end of the year
  • be a son, daughter, adopted child, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, or descendent of any of those
  • be a U.S. citizen or resident alien
  • have lived with you for over half of the year
  • be your claimed dependent for the tax year
  • have not provided over half of their own support during the year

There are adjusted gross income (AGI) limits for taxpayers claiming the Child Tax Credit, which for 2016 are:

  • $110,000 for married filing jointly
  • $55,000 for married filing separately
  • $75,000 for all other filing statuses

If the amount of your Child Tax Credit is greater than the amount of income tax that you owe, you may be able to claim the Additional Child Tax Credit. The Additional Child Tax Credit (ACTC) on Schedule 8812 is refundable to the extent of 15% of the taxpayer’s earned income in excess of $3,000. A refundable ACTC may be available to those who qualify and have not used up the available CTC amount.  For military taxpayers, nontaxable combat pay may be added to your earned income which may result in a larger credit. 

Determine if you qualify for the Child Tax Credit by reviewing IRS Publication 972, Child Tax Credit or visiting the IRS website.

 

ERNING INCOME CREDIT (EITC)

The Eared Income Tax Credit (EITC or EIC) is a tax credit available to certain individuals that help keep more of your hard-earned pay in your pockets. This “refundable” credit may give you a refund even if you had no tax withholding. Below is a breakdown of the credit in less confusing terms. You can also use the IRS’s EITC Assistant tool available in both English and Spanish to determine if you qualify for the credit for the 2018 tax yearn.

 

Do I qualify for EITC: The first step in determining if you qualify for the credit is that you must meet the following EITC rules for everyone: 

  • have a Social Security Number valid for employment
  • have some form of earned income through employment, self-employment, or another source, (this can include wages, salaries, tips, union strike benefits, taxable long-term disability benefits received before minimum retirement age, and net earnings from self-employment)
  • be a U.S. citizen or resident alien all year
  • not file as married filing separate
  • be a U.S. citizen or resident alien all year OR be a nonresident alien married to a U.S. citizen or resident alien, file a joint return and choose to be treated as a resident alien
  • not be the qualifying child of another person
  • not file Form 2555 or 2555-EZ
  • meet the adjusted gross income limits for 2018, which can be found below
  • have an investment income of $3,500 or less for the year

Earned Income and AGI Limits

Tax year 2018 Earned income and adjusted gross income (AGI) must each be less than:

Single, Head of Household or Widowed with 0 qualifying children $15,270.Single, Head of Household or Widowed with 1 qualifying children $40,320Single, Head of Household or Widowed with 2 qualifying children $45,802Single, Head of Household or Widowed with 3 qualifying children $49,194Married Filing Jointly 0 qualifying children $20,950Married Filing Jointly 1 qualifying children $46,010Married Filing Jointly 2 qualifying children $51,492Married Filing Jointly 3 qualifying children $54,884

The maximum amount of credit for Tax Year 2018 is:

  • $6,431 with three or more qualifying children
  • $5,716 with two qualifying children
  • $3,461 with one qualifying child
  • $519 with no qualifying children,//

Relationship: Your son, daughter, adopted child1, stepchild, foster child2 or a descendent of any of them such as your grandchild.

Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew

Age: Your son, daughter, adopted child1, stepchild, foster child2 or a descendent of any of them such as your grandchild

Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew.

At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and younger than 19

At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) younger than 24 and a full-time student

At the end of the filing year, your child was any age and permanently and totally disabled3

Residency: Child must live with you (or your spouse if you file a joint return) in the United States 4 for more than half of the year.

Joint Return: The child cannot file a joint return for the tax year unless the child and the child's spouse did not have a separate filing requirement and filed the joint return only to claim a refund.

IMPORTANT:  Only one person can claim the same child. If a child qualifies for more than one person and one of the persons is a parent or parents, the non-parent can claim the child only if their AGI is higher than the parent(s). If the child qualifies another relative and the parent AGI rules do not apply, the taxpayers choose. If more than one person claims the same child, IRS applies the tiebreaker rules. Read more about Qualifying Child of More Than One Person here.

Qualifying Relative; Four tests must be met for a person to be your qualifying relative. The four tests are:

Education Credits Forms: 1098-T: An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American opportunity tax credit and the lifetime learning credit.

Who Can Claim an Education Credit? There are additional rules for each credit, but you must meet all three of the following for either credit:
  1. You, your dependent or a third party pays qualified education expenses for higher education.
  2. An eligible student must be enrolled at an eligible educational institution.
  3. The eligible student is yourself, your spouse or a dependent you list on your tax return.

If you’re eligible to claim the lifetime learning credit and are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. You can't claim the AOTC if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. For more information about AOTC and foreign students, visit American Opportunity Tax Credit - Information for Foreign Students.

The law requires that both you and your qualifying student have a valid Social Security number or Individual Taxpayer Identification Number, issued before the due date for your tax return, in order to claim the AOTC.