Can more than one tax credit be taken on a return? If so, which ones can be taken together?

Question

Can more than one tax credit be taken on a return? If so, which ones can be taken together? How are multiple tax credits limited?

Answer 1

Short answer:

"Can more than one tax credit be taken on a return?"

Yes.

"If so, which ones can be taken together?"

All of them.

"Can more than one tax credit be taken on a return?"

Yes.

"If so, which ones can be taken together?"

All.

"How are multiple tax credits limited?"

It depends on the tax law for the tax credits.

Explanation:

First of all, let me give you some definition.

http://www.irs.gov/newsroom/article/0,,id=120665,00.html

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes.

A nonrefundable credit is a statutory credit that is offset against, and limited to, the amount of the tax liability for the tax year.

A refundable credit is a credit that can reduce tax liability below zero. If these credits exceed the total tax liability, the excess is refunded.

Taxpayers should consider their eligibility for the credits listed below:

http://www.irs.gov/pub/irs-pdf/f1040.pdf

These are all possible credits that one can lawfully take in the US.


********From line 47 to line 55, these are non-refundable credits.

You are suppose to take the credits by the line order. For instance, you would take Foreign tax credit before Education credit. You would take Education credit before Child tax credit.....

Line 47 Foreign Tax Credit (form 1116) Are you paying foreign taxes such as your investment income (e.g. Nokia dividends are withheld by Finnish government- we ought to liberate them :)?

Lne 48 Child Care Credit (form 2441)
• The Child and Dependent Care Credit is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

Line 49 Credit for the Elderly or the Disabled: This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see IRS Publication 524, Credit for the Elderly or the Disabled. Gee I've difficult time obtaining any tax payer fitting in the catagory. Either their tax liabilty is zero or their income is too high.

Line 50 Education Credit (Form 8863) Do you have big kids that will not grow-up and stay at home?

Line 51 Retirement savings contribution credit (Form 8880) This suppose to help the lower and the middle class of America to save.

Line 52 Residential energy credits (Form 5695) I always think they should up the credit limitation.

Line 53 Child Tax Credits. • The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.


Line 54 and 55 MISC. Credits (such as hybrid car, Mortgage Interest Credit, Adoption credit and other odd credits).

• Adoption Credit: Adoptive parents may qualify for a tax credit of up to $10,960 for qualifying expenses paid to adopt an eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For more information, see the instructions for Form 8839, Qualified Adoption Expenses.



*******The following are refundable credits:

Line 66
• The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit.

Line 71
• Telephone Excise Tax Refund is a one-time refund for anyone who paid federal excise taxes for long-distance telephone service billed after Feb 28, 2003 and before Aug 1, 2006. A refund of previously collected telephone excise taxes may be requested on your 2006 federal income tax return. The refund request can be based on the actual tax paid or a standard refund amount ranging from $30 to $60. For more information, go to the IRS website at IRS.gov and link to Telephone Excise Tax Refund.

Line 68
Additional Child Tax Credit (form 8812)

This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.

Answer 2

Yes, you can take as many credits as you are eligible for on a return.

There are some limitations: for example, you can't take a Hope Credit and a Lifetime Learning Credit for the same student - but if there are two different students and you are eligible to take an education credit for both of them, you can take the Hope Credit for one of them and the Lifetime Learning Credit for the first one.

The other limitation is that most credits are non-refundable, so you don't get the credit if some other credit has already reduced your tax liability to zero. EIC and the Additional Child Tax Credit are refundable, so even if your tax liability is zero, you'd get the money back for them.

Answer 3

http://www.irs.gov - This is the place you can find out your answers. This is the only place that will give you the right answers and the most up to date answers, and there are many issues surrounding claiming all credits as every tax situation differs. Just because it applies to your friend or co-workers, dont' believe that it may apply to you also. It may, but don't ever assume when it comes to income taxes.

Type in Tax Credits it will show you many. The IRS loves to give us information; usable of course (smiles). As some have said, credits cannot reduce your tax liability past zero. Aka no tax due sorry no tax credit but in many cases EIC (Earned Income Credit and others such as the educational credits may be claimed in order to reduce that tax before you even get to the tax liability question. See, as we said, all situations differ. Case at point. Check the IRS site out, they are the best resource to help and we know of no situation that you can't take every credit in the book, "if you are 'eligible.'" The key.

Oh yes everyone seems to assume that you are referring to Federal Tax Credits For state it will depend on the state. We have state links on our site for your convenience.

Thank you. I remain

Sincerely,

Wayne Barney
BC Business Services, Inc.
Quality Financial Services Since 1994 with Clients in over 25% of the United States.
1877-343-5147 Toll Free
http://www.bcbsinc.com
email: [e-mail]

Answer 4

You can take any credits that you're entitled to. However, most credits can only reduce your tax liability to zero. Once you hit zero, any unused credits are lost. At least two fairly common credits are refundable though, the Earned Income Credit and the Additional Child Tax Credit. You get those back in cash even if you have no tax liability remaining.