Snagging a refundable tax credit is perhaps the best way to reduce your federal income tax bill. Uncle Sam could end up owing you money — even if you don’t owe any taxes.
In a recent announcement, the Internal Revenue Service identified four possibly refundable tax credits that taxpayers might be able to claim on their 2017 tax return — the one that’s due by April 17.
According to the tax-collecting federal agency, the credits are:
- Earned Income Tax Credit. This is for certain folks with low to moderate incomes, defined for 2017 as a taxable income of less than $53,930 for those who are married filing jointly and have at least three qualifying children. The threshold can be lower, depending on a taxpayer’s filing status and number of qualifying children. If you’re eligible for it, this credit is worth as much as $6,318.
- Premium tax credit. This is for certain folks who buy health insurance through the Health Insurance Marketplace, the exchange established by the Affordable Care Act (also known as Obamacare). The amount of this credit is based on a sliding scale. Use the Interactive Tax Assistant to see if you qualify.
- Additional Child Tax Credit. This is for certain parents who have at least one child qualifying for the Child Tax Credit, but who receive less than the full amount of the Child Tax Credit.
- American Opportunity Tax Credit. This is for certain taxpayers who are enrolled — or who have a spouse or dependent enrolled — in college at least half-time for one academic period. It’s worth as much as $2,500 per eligible student.
Note that you must file a 2017 tax return — even if you don’t owe any federal income taxes this year — to be able to claim tax credits for you which might qualify.
Also, claiming the Earned Income Tax Credit or the Additional Child Tax Credit can hold up your tax refund until at least Feb. 27, according to IRS projections.
To learn more about the difference between tax credits and tax deductions — as well as refundable credits and nonrefundable credits — check out “Pop Quiz: Is It Better to Have a Tax Credit or a Tax Deduction?”
For more pointers that can slash your tax bill this year, check out our other 2018 tax stories.
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