Tax credit for 2020 income tax return

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Filing income tax is one of the best way to get a refund for your overpaid taxes.  It is also a way to claim any unpaid stimulus check.  In addition, tax credit will allow families with children to get some money depending on the income of the parents.  One major distinction that you’ll see throughout this discussion is that some tax credits are refundable, while others are nonrefundable.  A refundable tax credit can be paid to the taxpayer, even if they have no tax liability. For example, if a taxpayer owes $1,000 in federal income tax in 2020 and has a $3,000 refundable tax credit, that additional $2,000 can be paid to them in the form of a tax refund. On the other hand, a non-refundable credit can be used to reduce tax liability to zero, but not beyond that point.

There is a long list of tax credits Americans could potentially qualify for, but many are very specialized and uncommon. On the other hand, there are some tax credits that millions of Americans qualify for, and here are eight of them: Child Tax Credit,  Credit for other dependents,  Child and Dependent Care Credit, Earned Income Tax Credit (EITC), The Retirement Contribution Savings Credit (Saver’s Credit), American Opportunity Tax Credit (AOTC), Lifetime Learning Credit (LLC), The 2020 Child Tax Credit.

The Child Tax Credit is available to taxpayers who have children who are under age 17 at the end of the tax year. For 2020, this means that any children who reach their 17th birthday prior to January 1, 2021 are not eligible for the credit.

The credit is worth $2,000 per qualifying child, and households with qualifying children can claim the Child Tax Credit for every child who qualifies with no upper limit. For example, if you have three children ages 14, 12, and 9, you can take the credit for each of them – a total of $6,000. A family with six qualifying children could get $12,000 in credits.

The Child Tax Credit is an example of a partially refundable tax credit. If the taxpayer has zero tax liability in a given year, as much as $1,400 of the Child Tax Credit can still be given to them.

Like many tax credits, the Child Tax Credit is income-restricted, although the limitations have become much more generous in recent years as a result of the Tax Cuts and Jobs Act. Above certain levels of adjusted gross income, or AGI, the credit begins to phase out – meaning that it is reduced – and if the taxpayer’s AGI is greater than an even higher threshold, the credit disappears entirely.

Assuming that you’re a married couple filing a joint tax return, and that you have qualifying children. If your adjusted gross income is $150,000 in 2020, you’re well below the phase-out threshold, and you’d be entitled to the full Child Tax Credit. If your AGI is $425,000, you’re in the middle of the two thresholds, and would therefore be entitled to some of the credit. And if your AGI is $500,000 for the year, you’d be in excess of the upper threshold for your filing status and wouldn’t be allowed to claim the Child Tax Credit at all for the 2020 tax year.

Credit for other dependents

The Child Tax Credit is a big help to many parents, but what if your child is 17? What if you have kids in college who you support? Or what if you have an aging parent who lives with you?

The point is that the Child Tax Credit doesn’t provide relief to everyone with dependents. That’s where the Credit for Other Dependents comes in. This was created as part of the Tax Cuts and Jobs Act and is a nonrefundable credit that is worth as much as $500 for each qualifying dependent.

For families in need of financial help, filing income tax as soon as possible will help them get a refund at the earliest possible time.

Note:  This is not a legal advice and presented for information only.  You need to discuss your individual situation with an Attorney or a CPA.

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