Chapter 25Personal 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, mortgage interest credit, credit for plug-in electric vehicles, and the new premium tax credit. Education tax credits are discussed in Chapter 33.

The child tax credit 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 $13,190 may be claimed on your 2014 return for costs of adopting a child under the age of 18 or a disabled person incapable of self-care (25.13).

The new premium tax credit applies to taxpayers with modest ...

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