Taxes For Dummies

Chapter 9

Form 1040, Schedule 3: Adding Up Your Credits and Payments

IN THIS CHAPTER

Understanding nonrefundable credits you can take

Adding up all the payments you’ve made

Making sure you’ve grabbed your refundable credits

If people focused on their tax liability every year, there would likely be more stress associated with the size of that number. Fortunately, you’ve probably been making payments throughout the year (at least we hope so), and Congress has devised a world of refundable and nonrefundable tax credits to reward you for behaviors they want to encourage, such as saving for retirement, adopting a child, or sending an older child to college. We’re entitled to credits for putting solar panels on our roof or a wind turbine in our field. We’re even eligible for credits if our income is low, but we still go to that regular job. And, since all of these credits or payments will reduce the amount that we owe on our annual tax return, or even produce a refund, some folks are more focused on these numbers than on the amount of tax assessed on the income that they earned during the year. Conversely, we’ve seen other people who ignore valuable credits that they are eligible to ...