All Refunds Are Not Created Equal
So, I get this questions a lot, “How come so and so got $10,000 with three kids?” So many variables come into play when it comes to what your tax refund will be. Tax refunds are an overpayment of what you owe Uncle Sam. How much you owe is determined by your income and different deductions and credits you may be eligible for. Not all credits are refundable, so if you do not have to pay taxes, you do not get that credit. Refundable credits, such as the additional child tax credit, will not be a set amount either. The additional child tax credit is up to 15% of your taxable income over $3,000. Example, if your earned income is $13,000 and you have three children, you would receive $1,500 with the additional tax credit instead of the full $3,000. When finding a tax preparation specialist, it is important to choose one who will ask the important questions to make sure that you are taking advantage of every credit and deduction that you are eligible for to increase your refund.
What is the Child Tax Credit & How Does it Apply to You?
The child tax credit is a dollar for dollar reduction in your tax bill. The child tax credit gives an income boost to the parent or guardians of dependent children. The amount of the tax credit will depend on your income so it is not a set amount. It allows you to reduce your tax debt up to $1,000 per each qualifying child under the age of 17. It is not a deduction nor is it refundable. Example; Lets say you owe the IRS $2,000.00 but you are eligible for $3000.00 in credits; you will not get the extra $1,000 back to you. This is the biggest misconception when it comes to tax refunds. Many people believe that they will actually get $1,000 per child with the child tax credit alone. This is not true. The Additional Child Tax Credit is actually the refundable credit that is a credit up to 15% of your taxable earned income over $3,000.