A tax credit is a dollar-for-dollar reduction of taxes owed. During the year, the government takes money from your paycheck in the form of taxes. At tax time, you may be eligible to claim certain tax credits.
- A nonrefundable tax credit will reduce the amount of taxes you owe the government.
- A refundable tax credit also reduces the amount of taxes you owe, but could result in a refund check.
There are many federal and state tax credits available to working families with low incomes. Check to see if you qualify for free tax preparation assistance, call 2-1-1 at the end of the calendar year.
Learn more about the tax credits listed below and if you are be eligible to claim them:
- Earned Income Tax Credit
The EITC is a refundable credit for working families and individuals who meet certain requirements and file a tax return. The refund amount varies depending on your income and marital and parental status.
- Federal Child Tax Credit (CTC) and Additional Child Tax Credit:
The Federal Child Tax Credit is a nonrefundable tax credit that helps reduce tax liability. It can pay as much as $1,000 for each qualifying child under the age of 17 at the end of 2007. If you qualify for more CTC money than money you owe the government, you can claim the Additional Child Tax Credit which is a refundable tax credit that will return the money you're owed by the government.
- Empire State Child Credit
New York State residents who qualify for the Federal Child Tax Credit or meet certain income requirements and have a qualifying child could be eligible for the Empire State Child Credit, a tax refund from the state. The general tax refund is $100 per qualifying child or 33% of the taxpayer's allowed Federal Child Tax Credit - whichever amount is greater.
- Federal Child and Dependent Care Credit
This credit is nonrefundable. Working people who pay child or dependent care expenses may qualify for tax credits as much as $1,050 for one dependent or $2,100 for two or more qualifying dependents.
- New York State Child and Dependent Care Tax Credit
The New York State Child and Dependent Care Tax Credit is a refundable tax credit. Generally, families earning less than $50,000 a year who pay child care expenses for children 13 and under qualify for it.
- Hope Credit
The Hope Credit is a tax credit toward qualified education expenses for eligible students. It is a nonrefundable tax credit of up to $1,650. It can only be claimed for the first two years of college and the student must be enrolled at least half time for at least one academic period.
- The Lifetime Learning Credit
The Lifetime Learning Credit helps pay for college costs after the first two years, when the Hope Credit is no longer available. It can be claimed for an unlimited number of years as long as the student is taking classes.