Ladder Up ensures clients receive the tax credits they deserve. Tax credits reduce a client’s tax liability. Tax credits are generally either refundable or nonrefundable. A refundable credit is given to clients even if they do not owe any tax. A non-refundable credit is given to a client up to the amount of income tax owed. Nonrefundable credits do not offset other taxes, such as self-employment tax. Below are some common tax credits.
Child Tax Credit
Clients may qualify for a nonrefundable child tax credit of up to $2,000 per qualifying child. The child must have a valid Social Security Number (SSN), but parents with either an SSN or an Individual Taxpayer Identification Number (ITIN) may claim the credit on their return.
Additional Child Tax Credit
Since the child tax credit is nonrefundable, certain taxpayers with earned income or three or more qualifying children may be entitled to the Additional Child Tax Credit. This credit is refundable up to $1,600 per child.
Credit for Other Dependents
There is a $500 nonrefundable credit available for dependents who don’t qualify for the child tax credit, such as qualifying relatives, children aged 17+, or dependents with ITINs.
Child and Dependent Care Credit
This nonrefundable credit is for care costs for children under 13 or for dependents who are physically or mentally unable to care for themselves. The care must enable the parent to work, job search, or attend school. The amount of this credit depends on your income and claimed expenses. It can range from up to $1,050 for one qualifying dependent and up to $2,100 for two or more qualifying dependents.
Earned Income Tax Credit (EITC)
This refundable credit is for taxpayers with earned income. It ranges depending on household size—up to $600 with no qualifying children and to up to $7,430 for three or more qualifying children. Taxpayers and qualifying children must have valid SSNs to claim.
Energy Efficient Home Improvement Credit
This new nonrefundable credit allows of up to $1,200 annually is up to 30% of the cost of qualified improvements such as insulation, doors, windows, skylights, air conditioners, water heaters, and energy audits. Whether labor costs can be included depends on the type of improvement.
Other Credits You May Qualify For
- American Opportunity Credit
- Lifetime Learning Credit
- Retirement Savings Credit
- Premium Tax Credit
- Electric Vehicle Tax Credit