Tax Credit Info
Define Tax Credit
An amount you can subtract from the tax you owe. Can be used to reduce payment, or allow you to gain money (claim tax credits)
What does EITC stand for?
Earned Income Tax Credit
What does CTC stand for?
Child Tax Credit
What does AOTC stand for?
American Opportunity Tax Credit
Jake has 3 children, and he is able to qualify for $1000 per child in Child Tax Credits. How much can he claim?
$3000
How do Tax Credits help people?
Reduces their actual payment for taxes.
Who uses the EITC?
Low-income families
Who qualifies for the CTC?
People with children
What is the AOTC for?
Education expenses
Miranda goes to college and spends money on a new purse, tuition, partying, and new coursework textbooks. Which expenses are covered by the AOTC?
Textbooks and tuition
Are Tax Credits or Deductions better for low income families? Why?
Tax Credits are better for low income families because it takes the strain off of their wallet by reducing their actual payment.
Is the EITC refundable?
Yes
How much money do you receive per child in CTC?
$1600 per child
What expenses are covered by the AOTC?
Room and board, course fees, tuition, medical expenses, course materials, etc.
William has to pay $4,300 in taxes, but he qualifies for the max payout for the AOTC. What is his new tax payment?
$1800
How is a Tax Credit different from a Deduction?
Deductions are pre-tax reductions and Tax Credits are post-tax reductions
What is the max salary to still be eligible for the EITC?
$63,698 per year if filing jointly, or $56,838 if filing individually ($64k and $57k)
What are the qualifications for the CTC?
Under 17 yrs old, provide less than half of their income, and a US citizen, and a yearly income of $200,000 (or $400,000 if filing jointly)
What dollar amount does the AOTC reduce your tax payment by?
$2,500
Carmen is single and has 4 kids. She will receive $1,000 per child in CTC. How much of the CTC is refundable for her?
$4,000 because that is the max refundable amount for individuals