Tax credits reduce what you owe Uncle Sam and can put some hard earned cash back in your wallet. There are two types of credits: refundable and nonrefundable. While both will decrease your debt, only refundable credits can get you a refund even if you don’t owe any taxes.
If you use ezTaxReturn to prepare and e-file your taxes, you’ll be guided to take advantage of credits for which you’re eligible. Regardless, it’s good to know what’s available. So here’s a quick review of five potentially beneficial credits.
1. Earned Income Credit
The EIC is a refundable credit for workers below a certain earnings level. Income limits and credit amounts vary based on earnings, filing status and eligible children. You can still qualify for a reduced credit even if you don’t have kids.
To qualify for the Earned Income Credit for tax year 2018, your earned income and adjusted gross income (AGI) must each be less than:
| If filing… | Qualifying Children Claimed | |||
|---|---|---|---|---|
| Zero | One | Two | Three or more | |
| Single, Head of Household or Widowed | $15,270 | $40,320 | $45,802 | $49,194 |
| Married Filing Jointly | $20,950 | $46,010 | $51,492 | $54,884 |
The maximum amount of credit 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
2. Child Tax Credit
Have a dependent under 17? If so, you may qualify for the Child Tax Credit which is potentially worth $2,000 per child. Up to $1,400 per child is refundable as the Additional Child Tax Credit. Dependents must be 16 or younger at the end of the year to qualify. If the dependent turned 17 during the income year, they will not qualify for the Child Tax Credit.
3. Saver’s Credit
The Saver’s Credit helps low income workers save for retirement. To qualify, you must contribute to an IRA or retirement plan at work and fall below the income limit. The credit will be 10%, 20% or 50% of your contribution up to $2,000 based on your adjusted gross income. The chart below will help calculate your credit.
| 2018 Saver’s Credit | |||
|---|---|---|---|
| Credit Rate | Married Filing Jointly | Head of Household | All Other Filers* |
| 50% of your contribution | AGI not more than $38,000 | AGI not more than $28,500 | AGI not more than $19,000 |
| 20% of your contribution | $38,001 – $41,000 | $28,501 – $30,750 | $19,001 – $20,500 |
| 10% of your contribution | $41,001 – $63,000 | $30,751 – $47,250 | $20,501 – $31,500 |
*Single, married filing separately, or qualifying widow(er)
4. Premium Tax Credit
If you bought insurance through the Health Insurance Marketplace you might be eligible for the Premium Tax Credit. This credit can be used in advance to help lower monthly premiums or it can be claimed when you file your tax return.
5. Child and Dependent Care Credit
If you pay someone to watch your child, disabled spouse or other dependent while you go to work, you may qualify for the Child and Dependent Care Credit. You can claim up to $3,000 in expenses for one person or $6,000 for two or more people. The credit amount ranges from 20-35% of your expenses depending on your adjusted gross income.
