Your Ask Joey ™ Answer

You might also be interested in...

  • What is a refundable tax credit?

    A refundable tax credit is one of the two types of personal tax credits that individual taxpayers can qualify for. A refundable tax credit means that a taxpayer can get a refund, even if it is more than the taxpayers tax liability. As you can see in the example below, the taxpayers tax liability is $100, but a refundable tax credit of $150 would result in a tax refund of $50. A nonrefundable tax credit is different because the taxpayer only receives credit up to the amount of tax that they owe. In the example above, even though the taxpayer has tax credits of $150, they can only take $100 worth of credits because their tax liability is $100. Therefore, they would not have a refund or any taxes due. Below is a list of common refundable and nonrefundable personal tax credits:

  • What is the child tax credit?

    The child tax credit is a type of refundable personal tax credit. Basically, taxpayers will receive a tax credit of $2,000 for each qualifying child. Qualifying child must be under 17 years old. There are a number of phase outs and limitations, so be sure to consult with your tax professional before applying the refundable credit. The IRS provides has questionnaire to help you determine if your child qualifies: IRS Child Tax Credit Questionnaire

  • What is the earned income credit?

    The earned income credit is offered to low to moderate income working families (especially those with children). The earned income credit is a refundable tax credit, which means that a family can qualify for the credit even if their taxable income is $0. Criteria for taxpayers who qualify for the earned income credit are as follows: 1) Must live in the U.S. for more than half the taxable year; 2) Must not have more than a specified amount of income that is deemed disqualified 3) Must meet certain low-income thresholds 4) File a joint return with the taxpayer’s spouse (certain exceptions apply)