Chapter 25

Personal Tax Credits Reduce Your Tax Liability

In this chapter you will find discussions of the child tax credit, dependent care credit, earned income credit (EIC), adoption credit, retirement savings credit, health coverage credit, mortgage interest credit, and the credit for plug-in electric vehicles. Education tax credits are discussed in Chapter 33.

The child tax credit for 2012 is $1,000 for each qualifying dependent child under age 17. To claim the credit, you must follow the steps on the “Child Tax Credit Worksheet.” There is a phaseout of the credit (25.3). If the credit exceeds your tax liability, you may be entitled to a refundable credit called the “additional tax child credit”.

The dependent care credit is for working people who pay care costs that allow them the freedom to work. Depending on your income, the credit is 20% to 35% of up to $3,000 of care expenses for one dependent and up to $6,000 of expenses for two or more dependents. If your adjusted gross income exceeds $43,000, the maximum credit is $600 for one dependent and $1,200 for two or more dependents.

The earned income credit (EIC) is provided to low-income workers who support children, and a limited credit is allowed to certain workers without qualifying children (25.10).

An adoption credit of up to $12,650 may be claimed in 2012 for costs of adopting a child under the age of 18 or a disabled person incapable of self-care.

For years after 2012, several credits discussed in this chapter are scheduled to be reduced substantially, although it is likely that Congress will block the reduction and extend the 2012 rules to 2013; see the e-Supplement at jklasser.com for an update.

25.1 Overview of Personal Tax Credits

25.2 Child Tax Credit for Children Under Age 17

25.3 Figuring the Child Tax Credit

25.4 Qualifying for Child and Dependent Care Credit

25.5 Limits on the Dependent Care Credit

25.6 Earned Income Test for Dependent Care Credit

25.7 Credit Allowed for Care of Qualifying Persons

25.8 Expenses Qualifying for the Dependent Care Credit

25.9 Dependent Care Credit Rules for Separated Couples

25.10 Qualifying Tests for EIC

25.11 Income Tests for Earned Income Credit (EIC)

25.12 Look up EIC in Government Tables

25.13 Qualifying for the Adoption Credit

25.14 Claiming the Adoption Credit on Form 8839

25.15 Eligibility for the Saver’s Credit

25.16 Figuring the Saver’s Credit

25.17 Health Coverage Credit

25.18 Mortgage Interest Credit

25.19 Residential Energy Credits

25.20 Credits for Fuel Cell Vehicles and Plug-in Electric Vehicles

25.21 Repayment of the First-Time Homebuyer Credit

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