Take Advantage of Tax Credits
These credits can increase a refund or reduce a tax bill. Usually, credits can only lower a tax liability to zero. But some credits, such as the Adoption Credit, the EITC, the child tax credit, a portion of the American Opportunity Credit, the Making Work Pay and the first-time homebuyer credit, are refundable — in other words, they can make the difference between a balance due and a refund. One of the best, and most abused, tax credits is the Earned Income Tax Credit (EITC). Unlike other tax credits, the EITC is credited to your account as a payment. That means the EITC often results in a tax refund even if the total tax has been reduced to zero. You may be eligible to claim the earned income credit if you meet specific earned income requirements.
Credit for Child and Dependent Care Expenses — a qualifying child must be under the age of 13 or permanently and totally disabled. A qualifying child is determined without regard to the exception for children of divorced or separated parents and the exception for kidnapped children.
Child Tax Credit — a qualifying child must be under age 17 and a U.S. citizen or national or a U.S. resident.
Earned Income Tax Credit — a qualifying child does not have to meet the support test. Also, a qualifying child must have lived with the taxpayer in the United States for more than half the year and have a social security number that is valid for employment in the United States. A qualifying child is determined without regard to the exception for children of divorced or separated parents. If a qualifying child is married, he or she must also meet the marital status and nationality tests for a dependent.
Adoption Credit — NEW FOR 2010! The adoption credit is now a refundable credit. In prior years the credit could only be used to offset tax due and the balance had to be carried forward. For 2010, the credit is refundable up to $13,170 AND taxpayers who are carrying forward adoption credits from previous years can receive the balance as a refundable credit on their 201 tax return. Persons who adopt Special Needs Children qualify for the MAXIMUM REFUND automatically!
First Time Homebuyer Credit — This credit is still available for taxpayers who entered into binding contracts by April 30, 2010 and closed by September 30, 2010. Strict eligibility guidelines must be met to see if you can qualify for the credit as either a First Time Homebuyer or a Long Time Resident.
American Opportunity Credit — This education credit was extended for students in their first four years of post-secondary education. The credit is 100% of the first $2,000 of tuition, fees and required course materials, and 25% of the next $2000 paid. Up to 40% is refundable! That can be $1,000 of refundable credit if you have qualified expenses of at least $4,000!