What is a Tax Credit?
How Does a Tax Credit Work?
For example, the Internal federal income taxes by a fixed amount for each qualifying child. A qualifying child is a dependent under 17 who is a U.S. citizen or a resident alien. The child must be the taxpayer’s son, daughter, adopted child, grandchild, stepchild, eligible foster child, sibling, stepsibling or descendant. The child must live with the taxpayer for more than one-half of the tax year. In many cases, divorced parents decide which parent receives the child .
The child tax credit is not a , it is a credit. That means it is a dollar-for-dollar reduction in your tax bill rather than a reduction in your taxable income.
Why Does a Tax Credit Matter?
Tax credits obviously lower a person’s tax bill, which is why credits. There are several different types of tax credits, though some are only available to people in certain income ranges (typically under $100,000-$150,000) and most are only available to people in certain circumstances or companies in certain industries.invest time in seeking out and structuring transactions to maximize those