Top Overlooked Tax Credits

Child Tax Credit

You may qualify for a credit of up to $1,000 per qualifying child. A qualifying child is an individual who is under age 17 at the end of the year, is claimed as a dependent, and meets the definition of a child under the Uniform Definition of a Child as a son, daughter, stepchild, adopted child, grandchild or eligible foster child.

Additional Child Tax Credit

You may receive less than the full amount of the Child Tax Credit because this credit is limited to your available tax liability. In certain cases, you may be entitled to an additional credit in excess of your tax liability. The additional child tax credit is available to taxpayers with an income greater than $3,000 and is a refundable credit.

Active duty military members must include combat pay in their earned income calculation for the additional child tax credit. This addition may result in a greater amount of tax refund for the taxpayer. Combat pay continues to be excluded from taxable income under Internal Revenue Code section 112.

Adoption Credit

If you adopted a child, you may be able to take a credit for qualified adoption expenses of up to $13,360 per child. If you adopted a special needs child, you may claim a credit of $13,360 regardless of your expenses. the credit is fully refundable for tax year 2011. You must mail the tax return and proof of adoption to receive your credit.

Child and Dependent Care

If you were working and had dependent care expenses for a dependent child under age 13 or for a dependent or spouse who is disabled, you may be able to claim a credit for these expenses. This nonrefundable credit is calculated based on your dependent care expenses and your income. The maximum credit is $1,050 for the expenses for one qualifying child or $2,100 for more than one child.

America Opportunity and Lifetime Learning

You may be able to claim a Lifetime Learning Credit of up to $2,000 for the family. The Lifetime Learning credit is a nonrefundable credit and is based on qualified tuition and fees paid at an accredited post-secondary institution. The credit is available every year you, your spouse, or a dependent pays for any qualified education expenses.

Top Overlooked Credits

Earned Income

The Earned Income Credit is a refundable credit for low-income workers with earned income. The credit is available for taxpayers with or without children. You could be entitled to a refundable credit of up to $3,094 (if you have one qualifying child), $5,112 (if you have two qualifying children), $5,751 (if you have more than two children), or $464 (if you have no qualifying children).

You have earned income if you work for someone else or if you are self-employed. Taxable earned income includes wages, salaries, tips, union strike benefits, long-term disability benefits received prior to minimum retirement age, and net earnings from self-employment. You may elect to include nontaxable combat pay in earned income for the Earned Income Credit purposes. The ability to decide whether to include the combat pay enables you to choose the largest possible Earned Income Credit.

If you qualify for the Earned Income Credit, it reduces the tax you owe. The credit is refundable if your withholdings and Earned Income Credit amount are greater than the tax liability you may have on your tax return.

Retirement Savings Contributions

If you contribute to an IRA or an employer-provided retirement account, such as a 401(k), you may be eligible for a credit. The credit is based on up to $2,000 of your contribution for the year. You must be age 18 or older to claim the credit and you cannot be a student or claimed as a dependent on another's return. The credit is in addition to any deduction or exclusion from income for the contribution.

Excess Social Security Tax - Railroad Retirement Tax (RRTA)

The maximum Social Security taxes or RRTA tier 1 an individual must pay in 2011 is $4,486. If you worked for one employer and paid more than $4,486, you must contact your employer for a refund of the overpayment. If you worked for more than one employer and the combined total of your Social Security taxes or RRTA is greater than the maximum amount, you may claim the excess taxes paid as a refundable credit on your tax return.

Foreign Tax Credit

If your Form 1099-INT or Form 1099-DIV shows you paid foreign taxes, you may be eligible to claim either a credit or an itemized deduction for these taxes. Generally, the foreign tax credit results in a greater tax savings than deducting the foreign taxes as an itemized deduction.

Residential Energy Efficient Property Credits

The residential energy efficient property credits are available each year in full, may not be carried over and may offset the AMT. To qualify for the credits, the home must be the taxpayer’s principal residence, must be located in the U.S., and the property or improvements must have a reasonable life expectancy of at least five years. These credits are available on the installation of:

Solar water heating system, limited to 30% of the cost. Note: Not available for spa or pool water heating systems.

Solar energy production system, limited to 30% of cost.

Qualified fuel cell power plant, limited to 30% of cost.

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