What’s more, the American Opportunity Credit is a partially refundable education tax credit. That means if you’ve offset your applicable taxes and there’s some of the credit left over, you could receive money back as a refund. We’ll get into those specifics a little later.

Have other student tax filing questions? Be sure to visit our Tax Guide for College Students and find out about student forms that can be filed for free. 

American Opportunity Credit rules

On top of qualified tuition and fees, books and supplies (including a computer if it’s required for enrollment or attendance) count as eligible school expenses. However, the same expenses may not be used to claim any of the other education tax credits, deductions, or exclusions.

Instead of $2,500 of qualified education expenses applying to the credit directly, the American Opportunity Credit rules work slightly differently. The expense calculations are broken into two parts.

Here’s what that looks like. If you’re an eligible student, the AOTC is a credit of:

• Up to 100% of the first $2,000 of qualified expenses
• Up to 25% of the next $2,000 of qualified expenses

As mentioned above, the American Opportunity Tax Credit is partially refundable. If you don’t have a tax liability for the year, you can get up to 40% ($1,000) back.

Let’s review an example calculation to see this in action:

Steve and Carol pay $8,000 in qualified education expenses during the tax year for their daughter’s junior year in college. Their tax liability for the tax year is $1,000. Under the American Opportunity Credit, they qualify for a credit of $2,500, $1,000 of which is refundable.

Kiddie tax exception –  If the AOTC is claimed by a child who is subject to the kiddie tax, the credit is not refundable. Note that the student doesn’t have to actually pay kiddie tax to be considered subject to the kiddie tax. A student with no unearned income can still be subject to the kiddie tax rules.

American Opportunity Credit phaseout – If your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if you’re married filing jointly), your eligibility will start to “phase out” — meaning you may only qualify for a partial credit or none at all. You cannot claim the credit if your MAGI is over $90,000 ($180,000 if you’re married filing jointly).

American Opportunity Credit requirements and eligibility

To claim the American Opportunity Tax Credit, you’ll have to meet several requirements.

Enrollment – You must be enrolled for at least one academic period that begins in the tax year in which you are claiming the AOTC. For 2023, an academic period that began during the first three months of 2024 is treated as beginning in 2023 if you paid qualified education expenses in 2023 for that academic period. You also must be:

• Enrolled in an eligible educational institution at least part time
• Enrolled in a post-secondary undergraduate program leading to one of these:
  • Degree
  • Certificate
  • Other recognized educational credential

The school decides what qualifies as full-time or half-time enrollment. Although the number can be higher or lower, most educational institutions see 12 credit hours in one semester as full-time status.

However, the standard for half-time workload cannot be lower than the standard established by the Department of Education.

Years of study – The student must not have completed the first four years of post-secondary education as of the beginning of the taxable year. This definition is also determined by the school.

Claiming the AOTC previously – You can only claim the American Opportunity Tax Credit four times per student. The Hope Credit, a predecessor of the American Opportunity Credit available through 2009, will also count in the four available uses of the American Opportunity Credit.

AOTC qualifying expenses

Tuition, enrollment fees, and related expenses to the program of study typically count as a qualified educational expense for the AOTC. This includes the cost of things like:

• Books
• Supplies
• Equipment
• Student activity fees (if paid to the institution as a condition of enrollment or attendance)

The tax credit does not cover higher education expenses associated with:

• Room and board
• Transportation
• Medical insurance

You are allowed to pay for qualified education expenses with borrowed funds like student loans or credit cards. However, you can’t claim the credit if you paid for qualifying expenses with scholarships, federal grants (like the Pell Grant), employer-provided assistance, or funds from a 529 savings plan — unless the scholarship, grant, assistance, or 529 interest are treated as taxable income.

What can affect your eligibility for the American Opportunity Credit?

There are a few situations which may exclude you from taking the credit. You can’t take the AOTC if any of the following apply:

• Your filing status is married filing separately (MFS).
• You are claimed as a dependent on another person’s tax return (such as the taxpayer’s parents’ return).
• You (or your spouse) were a nonresident alien for any part of the year and the nonresident alien did not elect to be treated as a resident alien for tax purposes.
• You used the same expenses to claim the Lifetime Learning Credit.
• You used the same expenses to treat a scholarship, grant, or employer-provided educational assistance as tax-free.
• You received a refund of all expenses.
• The eligible student did not have an SSN or ITIN on or before the due date for filing the tax return for the tax year.

Tax tip: Lifetime Learning Credit may be another option.

If any of the above has disqualified you, don’t despair. The Lifetime Learning Credit may be available to students who don’t meet American Opportunity Credit eligibility. This can include students who are enrolled for college credit less than half-time or have already completed four years of post-secondary education.

American Opportunity Credit tax forms

If you paid qualified educational expenses during a specific tax year to an eligible institution, then you will receive Form 1098-T. Colleges are required to send the tax form by January 31 each year, so you should receive it shortly after that. Some colleges may make it available to you electronically.

The Internal Revenue Service (IRS) requires that you complete tax form 8863 and file it with Form 1040 when filing your annual income tax return.

The American Opportunity Credit vs. The Hope Credit

The Hope Credit was a nonrefundable credit which qualifying students could claim for their first two years of post-secondary education. The American Opportunity Tax Credit replaced the Hope Credit in tax year 2009. By replacing the previous education credit, the AOTC expanded the tax benefits available to students paying for higher education and its related expenses.

Get help claiming the American Opportunity Credit

Whether you choose to file with a tax pro or file with H&R Block Free Online, we can help you file the forms related to the American Opportunity Credit.

The post What is the American Opportunity Credit? appeared first on H&R Block.

No need to delay your filing! In fact, file now to receive your current Child Tax Credit right away and receive any top off amount later.  

The Child Tax Credit is a valuable tax benefit claimed by millions of American parents with the goal of offsetting the costs of raising a child. The Child Tax Credit is worth up to $2,000 for each qualifying child for 2023 (returns filed in 2024). 

What is the Child Tax Credit?

Simply stated, the Child Tax Credit (CTC) is a tax credit for those with dependent children under age 17 at the end of the tax year. Taking the credit can help lower your tax bill dollar-for-dollar – and depending on how much you owe, it may take your taxes owed down to zero.

Like many tax benefits, you must meet certain requirements before you can claim the Child Tax Credit. These cover details about the child, the relationship between you and the child, and your income.  We’ll get into these details below as we review who qualifies for the Child Tax Credit.

Don’t leave money on the table

File your taxes to claim the Child Tax Credit. Our tax pros can help you file in person or virtually, or you can file on your own online.

File now

Is the Child Tax Credit refundable?

The Child Tax Credit is not a refundable tax credit. But, the related credit, called the Additional Child Tax Credit, is refundable. This article covers details for both, but here are the major takeaways:

• The nonrefundable Child Tax Credit can reduce your tax to zero. If the amount of your credit is higher than the taxes you owe, you don’t “get back” the rest of the credit as a refund.
• The refundable Additional Child Tax Credit can reduce your tax to zero and, if there’s credit left over, you’ll get money back. 

How much is the 2023 Child Tax Credit? (also known as 2024 Child Tax Credit)

For 2023 taxes (for returns filed in 2024), the Child Tax Credit is worth $2,000 for each qualifying child. You can claim this full amount if your income is at or below the modified adjusted gross income threshold (see the income phase out information below).

The refundable Additional Child Tax Credit is worth up to $1,600.

Who qualifies for the Child Tax Credit?

Qualifying for the Child Tax Credit is about more than just having a child in your home. In fact, there are seven requirements, or “tests,” that must be met to qualify for this credit.

Let’s dig into them:

1. Age: The child must be under age 17 at the end of the tax year.
2. Dependent status: The child must be allowed as a dependent on your tax return.
3. Relationship: The child must be your own child, stepchild, sibling, or a descendant of your child, stepchild or sibling. It also includes a foster child placed with you by an authorized placement agency.
4. Citizenship: The child must be one of these: a U.S. citizen, a U.S. national, or a U.S. resident.
5. Financial support: The child must not have provided more than half of their own support.
6. Residency: The child must have lived with you for more than half of the tax year. There are exceptions for divorced or separated parents, where the child may live with the other parent for more than half the year, but you still may be able to claim the child.
7. Filing status: The child must not have filed a joint return, except in certain cases where they filed only to claim a refund of withheld income tax or estimated taxes.

On top of these tests, you must also meet income thresholds to take full benefit as the credit phases out for high earners. Read on to understand how the phase out works.

Child Tax Credit income limit and phase-out

The Child Tax Credit amounts change as your modified adjusted gross income (MAGI) increases. In fact, once you reach a certain threshold, the credit amount decreases or phases out.

And the credit amount is reduced $50 for every $1,000 — or fraction thereof — that your modified AGI is more than:

• $200,000 if filing as single, head of household, or qualifying widow(er)
• $400,000 if married filing jointly
• $200,000 if married filing separately

For the purpose of this credit, your modified adjusted gross income (MAGI) is your AGI plus excluded foreign earned income, possession income, and foreign housing.

Additional Child Tax Credit

If your tax liability is very low, the Child Tax Credit may not be the most advantageous for your situation. Or, if you don’t owe any taxes at all, you may not see the benefit of filing a return. While you may not be required to file a return, you could benefit from filing and claiming the refundable Additional Child Tax Credit. 

This is where difference between a refundable vs. non refundable tax credit matters. Claiming the ACTC means you could receive money back. The maximum refundable portion of the Additional Child Tax Credit is limited to $1,600 per qualifying child.

Additional Child Tax Credit qualifications

To qualify, one of these must apply:

• Your earned income must be more than $2,500 for 2023.
• You must have three or more qualifying children.

If you have at least one qualifying child, you can claim a credit of up to 15% of your earned income over the earned income threshold, $2,500.

If you have three or more qualifying children, you can either:

• Claim a refundable credit of the net Social Security and Medicare tax you paid in excess of your Earned Income Credit (EIC), if any.
• Use the 15% method described earlier.

How to claim the Child Tax Credit

You can claim the Child Tax Credit as part of filing your annual tax return with Form 1040. You’ll also need to complete and include Schedule 8812 (Credits for Qualifying Children and Other Dependents). This document will help you figure out how much of the Child Tax Credit/Additional Child Tax Credit you’re eligible to receive.

When to expect your Child Tax Credit refund 

The typical timeframe for the IRS to issue a refund is 21 days or less if you’ve filed electronically and chosen to receive your refund by direct deposit.

However, if you have anything missing or errors on your return, it could require additional review. It’s a good idea to double check your return to avoid this extra processing time. Additionally, it could take longer to receive if you’ve chosen a paper check, of course, as you may encounter longer mail times.

What else should you know about Child Tax Credit requirements and rules

You can’t carry forward any portion of the Child Tax Credit to future tax years. Additionally, you need to claim any other nonrefundable credits you may be eligible for, in a certain order to get the most benefit. In other words, you might need to calculate other credits first to properly apply the credit.

Child Tax Credit considerations for divorced and separated parents

The Child Tax Credit and Additional Child Tax Requirement requirements apply to divorced or separated parents, too. However, if the parents have a qualifying agreement for the noncustodial parent to claim the child, the noncustodial parent who claims the child as a dependent is eligible to claim the Child Tax Credit.

A parent can claim the CTC or ACTC if their filing status is Married Filing Separately.

Getting help claiming the Child Tax Credit

Have questions or ready to file your Schedule 8812? We’re here to help! Whether you file taxes online or with an H&R Block tax pro, we’ll help you uncover every last credit and deduction you deserve.

*As currently written, the bill would direct the IRS to issue any additional refunds as soon as possible to those who have already filed.   

The post Child Tax Credit: How it works & How to claim it appeared first on H&R Block.

To find out if you can claim Premium Tax Credit, you’ll need to look at your household income. If you do qualify, your household income will also determine the amount of credit you can claim.

Qualifying for the Premium Tax Credit

To qualify:

You must buy your health insurance from the federal or a state Marketplace.

You must file a joint return with your spouse if you’re married. There are exceptions to this if you’re considered unmarried for head of household filing status or if you’re a victim of domestic abuse or spousal abandonment.

You can’t be claimed as a dependent by anyone else

Your household income must fall below 400% of the federal poverty level for your family size. Your income must also be above the range for Medicaid eligibility (or above 100% of the FPL in states that didn’t expand Medicaid for adults). However, for tax years 2021 through 2025, you can still qualify with a household income of 400% and higher.

Here’s the 100% level that applies for 2023 in the 48 contiguous states:

• Family of one — $13,590
• Family of two — $18,310
• Family of four — $27,750

The poverty levels for Alaska and Hawaii are slightly higher.

Alaska:

• Family of one — $16,990
• Family of two — $22,890
• Family of four — $34,690

Hawaii:

• Family of one — $15,630
• Family of two — $21,060
• Family of four — $31,920

If you’re not sure if you qualify for this Premium Tax Credit, visit www.healthcare.gov. You’ll be able to shop around for different plans and get an estimate of your Premium Tax Credit.

Advance Premium Tax Credit

This advance tax credit is based on your estimated household income you provided when you signed up for marketplace insurance. It’s paid directly to your insurance provider every month and helps with the premium you pay out of pocket.

When you prepare your taxes, you’ll reconcile the advance paid to your insurance company. You’ll figure this with the amount of the Premium Tax Credit you’re eligible for based on your actual household income.

So, if your actual Premium Tax Credit was less than your advance, You’ll do one of these:

• Subtract the difference from your refund
• Add the difference to your balance due. Keep in mind that the difference is subject to certain caps.

If your Premium Tax Credit is more than your advance, you’ll either:

• Add the difference to your refund
• Subtract the difference from your balance due

The easiest way to minimize having to pay back the Premium Tax Credit is to update the marketplace when you have any life changes. Life changes can influence your estimated household income and your credit amount. So, the sooner you can update the marketplace, the better. This ensures you receive as close to the correct amount as possible. A life change includes:

• A marriage or divorce
• Having a baby, adopting a child, or placing a child for adoption or foster care
• A child on your policy turning 26 or a dependent changing status so they’re no longer your dependent
• The death of anyone in your household
• Changes to income
• An offer of job-based insurance coverage to anyone in your household, even if they don’t enroll in it
• Someone in your household getting coverage from a public program, like Medicaid, Children’s Health Insurance Program (CHIP), or Medicare
• A change to your permanent home address

If you receive the Advance Premium Tax Credit, you’ll need to file a return for the year, even if you don’t meet the income threshold to file otherwise.

Premium Tax Credit filing: Avoiding a rejected return

Be sure to attach Form 8962 to your return, if you, your spouse, or your dependent had ACA Marketplace coverage at some point in the year and received the Advance Premium Tax Credit. Attaching the form can help you avoid your return being rejected when you e-file (shown as Reject Code F8962-070).

To help you complete Form 8962, the health insurance exchange will send you Form 1095-A. Can’t find your Form 1095-A? You can get a copy from www.healthcare.gov or your state’s exchange portal if you received coverage from a state exchange.

If you don’t believe you had Marketplace insurance, you can attach a statement to your e-filed return stating that you did not have Marketplace coverage.

Get help claiming the Premium Tax Credit

Need help claiming this tax benefit? Whether you choose to file online or want to file your taxes with a tax professional, we’re here for you.

The post Premium Tax Credit: Help for Marketplace healthcare users appeared first on H&R Block.

Have other student tax filing questions?  Be sure to visit our Tax Guide for College Students and find out about student forms that can be filed for free. 

What is the education tax credit?

An education tax credit is a type of tax benefit provided by the U.S. government to help offset the costs of higher education expenses. Education tax credits can help reduce the amount of tax owed or provide a refund if the credit exceeds what you owe in some cases, giving you extra money to pocket into your personal funds. This is great news if you’re a student on a limited budget. 

And if you’re wondering, “Who qualifies for the education tax credits,” the answer varies by type of education credit available. We’ll dig into the details in the next section!

What credits are available?

A few key education credits can help your tax bottom line. They vary by make and design but aim to reduce your taxable liability as a college student.

A The two key tax credits include the American Opportunity Credit and Lifetime Learning Credit. Take note that both credits are subject to different phase-out limitations based on modified adjusted gross income (MAGI).

American Opportunity Credit (AOC)

The American Opportunity Tax Credit (AOTC) allows a maximum credit of $2,500 for qualifying educational expenses paid during the tax year (100% of the first $2,000 of qualified expenses and 25% of the next $2,000 of qualified expenses) for an eligible student attending an eligible educational institution.

In addition, up to 40% ($1,000) of the AOC is refundable, allowing taxpayers who do not have a tax liability to claim the credit.

Example: Eli and Monica pay $8,000 in eligible education expenses for their daughter’s junior year in college. Their tax liability is $1,000. Under the American Opportunity Credit, they qualify for a credit of $2,500, $1,000 of which is refundable.

Lifetime Learning Credit (LLC)

The Lifetime Learning Credit, or LLC, allows a maximum credit of up to $2,000 for qualifying educational expenses paid during the tax year for an eligible student enrolled at an eligible educational institution. The LLC is calculated as 20% of up to $10,000 of qualified education expenses per return. The credit is non-refundable.

Example: Glenn paid qualified tuition of $20,000. He is eligible for a maximum lifetime learning credit of $2,000 ($10,000 × 20%).

Who qualifies for and can claim these education tax credits?

To claim either credit, qualifying educational expenses must be paid for an “eligible student.” An eligible student can be yourself, your spouse, or your dependent for whom you claim an exemption. The meaning of an eligible student is different for each credit. Below are the general requirements to be considered an eligible student:

American Opportunity Credit (AOC)

• The student must not have had expenses used to figure the AOC in four earlier tax years.
• For at least one academic period during the tax year the student must meet both of the following requirements:

1.      The student must be a candidate for a degree, certificate, or other recognized educational credential.

2.      The student must take at least one-half of a full workload, which is determined by the school.

• The student must not have completed the first four years of secondary education.
• The student must not have a federal or state felony conviction for possessing or distributing drugs.

Lifetime Learning Credit (LLC)

• The student must be enrolled or taking courses at an eligible education institution.
• The student must be taking a higher education course or courses to get a degree or other recognized education credential or to get or improve job skills.

Considerations for choosing tax credits for education

There are a few things to keep in mind as you claim tax credits for education. Unlike the AOC, the LLC can be claimed an unlimited number of times. Plus, graduate students can qualify for the tax break, too! Also, remember that the AOC and LLC can’t be claimed in the same year for the same student.

To this end, it can help to check with a tax expert to determine the best credit for your unique situation to get you the most bang for your buck! Or you can take the DIY approach. H&R Block’s downloadable do-it-yourself tax software lets you do your taxes at your own pace.

For a complete list of requirements that must be met to claim the AOC and LLC, visit this resource: IRS Publication 970, Tax Benefits for Education.

Tax breaks for students: Understanding what education tax forms you’ll need

When you take educational tax credits, you’ll need to use a few additional forms than you normally would on your tax return. Add these to your list of tax forms that need to be completed as a student:

For the AOTC and LLC

• IRS Form 8863 – Used to claim the American Opportunity Credit (AOTC) and the Lifetime Learning Credit (LLC).
•  Form 1098-T –This shows the annual educational expenses you paid, and is referred to as a tuition statement.
• Form 1098-E – If you paid more than $600 in interest, a lender will automatically send you Form 1098-E. You may still deduct interest if you paid less than $600, but you’ll have to ask your servicer for the information.

Other tax benefits and deductions

These credits aren’t the only education tax credits or benefits available to benefit your tax return. Other relevant tax benefits include savings plans, scholarships, and the student loan interest deduction.

Where to go for more help with tax credits for education

If you’re looking for assistance navigating tax breaks for education, get help from H&R Block. Whether you file on your own with H&R Block Online or with a tax pro, we can guarantee 100% accuracy and your maximum tax refund or your money back.

Plus, keep in mind that some students can file for free! Find out more about who can file for free with H&R Block Free Online.

The post Education tax credits and breaks for college students appeared first on H&R Block.

What is the Earned Income Tax Credit?

In a nutshell, the Earned Income Tax Credit (EITC or EIC) is a refundable tax credit created to benefit low-income workers and their families. The “refundable” designation is important here.  That means you can receive money back even if your tax liability is zero.

The criteria for claiming this valuable credit are complex and getting the details right are important, as it can help you save money.

To help you understand the ins and outs, we’ve outlined details about the Earned Income Tax Credit requirements below so taxpayers like you can see if you qualify. Read on as we tackle the technicalities – as there are many!

How much is the Earned Income Tax Credit worth?

Taking the time to check the Earned Income Credit eligibility can pay off, as the tax benefit can be worth up to $7,430 (for 2023) depending on your filing status, income, and number of qualifying children.

The Earned Income Credit income limits

One of the most important parameters of figuring out who qualifies for the EIC is income level. So, if your income is higher than the limits, you can’t claim the credit.

As a starter, use this table to find the maximum Adjusted Gross Income (AGI), credit amounts for tax year 2023.

AGI Limits

Investment income limits

“But what if I have a mix of earned income and investment income?” Good question! If you have both earned and investment income, you might still be eligible for the Earned Income Credit, but you need to pay attention to the investment income limit. In fact, if your investment income exceeds $11,000 (for tax year 2023), you won’t qualify for the EITC benefit.

 Investment income includes:

• Interest
• Dividends
• Capital gains
• Royalties
• Rental income
• Passive activity income

Maximum credit amounts

Once you know you’re under the income limits, you can determine how much of the EITC you can receive. The maximum EITC will be based on the number of qualifying children you have:

• No qualifying children: $600
• 1 qualifying child: $3,995
• 2 qualifying children: $6,604
• 3 or more qualifying children: $7,430

What is earned income?

As the name implies, you need to earn income to meet the qualifications for the Earned Income Credit. Unearned income doesn’t qualify. Check out the lists below to understand what earned income is and isn’t. Earned income includes:

• Net earnings from self-employment
• Non-taxable combat pay you elect to include in income
• Salary, tips, wages, and other taxable employee pay
• Union strike and lockout benefits
• Some retirement disability benefits

If you’re in the military with nontaxable combat pay, you can elect to include the combat pay in earned income to calculate the EIC. Examples of income that doesn’t qualify include passive income, or income you aren’t actively generating on your own, such as:

• Interest and dividends
• Alimony
• Child support
• Pay while incarcerated
• Retirement income
• Social Security payments, pensions, and annuities
• Unemployment benefits

Earned Income Credit eligibility

We’ve covered amounts of income and what’s considered earned income, but there’s still more criteria to determine Earned Income Credit eligibility.  Yes, it’s a lot – hang in there!

Let’s jump into who qualifies for the EIC – beyond those who fit the income criteria. Earned Income Credit eligibility is as follows:

• You and your spouse (if tax filing jointly) must have valid Social Security numbers (SSN) by the due date of your tax return (including extensions)
• You generally can’t file as Married Filing Separately (MFS), or must meet specific requirements if you are separated from your spouse and not filing a joint return
• You must be a U.S. citizen or resident alien all year
• You can’t file a Form 2555 (relating to foreign earned income)

Earned Income Tax Credit eligibility if you have no children

Often, people believe that if they don’t have children, they don’t fit into the Earned Income Tax eligibility rules. But that’s not the case.  You can claim the credit, but there are a few more criteria to meet.

If you don’t have qualifying children, you must:

• Not be a dependent of another taxpayer
• Not be a qualifying child of another person
• Live in the United States for more than half the year
• Meet age requirements (at least age 25 but under age 65 at the end of the year)

Earned Income Credit qualifications with one or more children

Earned Income Credit qualifications with one or more children are as follows:

Age —

Your child is under the age of 19 or a full-time student under the age of 24 and is younger than you (or your spouse, if filing jointly). (If your child is permanently and totally disabled, the age requirements don’t apply.)

Relationship —

A qualifying child must be:

• A son/daughter, stepson/stepdaughter, or eligible foster child
• A brother/sister, stepbrother/stepsister, half-brother/half-sister
• A descendant of any of those people (for example, a grandchild, niece or nephew)

These rules also apply to relationships:

• Relationships established by marriage aren’t ended by death or divorce
• An adopted child is treated as your own child. An adopted child is any child placed with you for legal adoption

Residency —

The child must live with you in the same main home within the U.S. for more than half of the year. This doesn’t include Puerto Rico or other U.S. territories or possessions. Exceptions are allowed for:

• Temporary absences
• Children born or deceased during the year (if your home was the child’s home for over half of the time they were alive)
• Kidnapped children
• Those who are on extended active duty outside of the United States; (They can be treated as having a main home within the United States. Extended active duty equals more than 90 days or for an indefinite period)

Social security number —

A qualifying child must have a valid SSN issued on or before the due date of the tax return (including extensions).

Qualifying child and dependency requirement —

Your qualifying child can’t be used by more than one person to claim the EIC. You don’t have to claim the child as a dependent. However, a married child is only a qualifying child for EIC purposes if you could claim the child as a dependent.

Marital status —

A qualifying child must not file a joint return unless both conditions are true:

• They only file a return to claim a refund of taxes withheld or estimated taxes paid
• No tax liability would exist for either spouse if separate returns were filed

EIC for separated spouses —

Separated spouses, those with filing status of Married Filing Separately, can claim the EITC if they live with a qualifying child for more than half the year, and either:

• Don’t have the same principal place of abode as their spouse for the last six months of the year, OR
• Have a decree, instrument, or agreement (i.e., other than a divorce decree) and don’t live with their spouse at the end of the year.

Social Security number (SSN) requirement —

You can now claim the “childless” EIC even if your dependent doesn’t have a valid Social Security number. Previously, if you had a child who didn’t have an SSN, you couldn’t claim any EIC.

Filing status —

You, generally, can’t be Married Filing Separately and claim the EIC. There is an exception for separated spouses, however.

EIC FAQs

Undoubtedly, there’s a fair share of Earned Income Tax Credit requirements to bear in mind. To understand your own eligibility, we’ve listed some frequently asked questions here:

If I didn’t claim the EIC last year, can I amend my return and claim it?

To claim the Earned Income Credit for last year, you must amend your return by filing Form 1040-X by the later of these dates:

• Three years from the due date of your original return
• Two years from the date you paid the tax

Note that if you now have a valid SSN but didn’t claim the EIC last year because you or your child didn’t have a valid SSN by the due date of the return, you can’t amend your return to claim the EIC for earlier years.

If I claim the EIC, could I experience refund delays?

If you claim the EIC, your tax refund may not be sent until mid-February. This is due to fraud and security measures put in place by the Path Act. The Internal Revenue Service (IRS) still expects to issue most refunds in less than 21 days.

What happens if I have an EIC error?

As mentioned, claiming the EIC is complicated – and making an error can have consequences.  First, an error when filling out the EIC portion of your federal tax return could delay your tax refund.

Additionally, an error could lead to you not receiving the credit at all and jeopardize your ability to claim the credit in the future. If the IRS denies your whole claim you:

• Must pay back EIC amount you’ve been paid in error, plus interest
• Need to file Form 8862, Information to Claim Certain Credits After Disallowance, before you can reclaim the credit if the credit was denied or reduced for any reason other than a math or clerical error

If I’m separated from my spouse, can I file as Head of Household to get the EIC?

You can file as Head of Household if you meet the tests and were unmarried or considered unmarried for the year. You’re considered unmarried if:

• You file a separate return
• You paid more than half the cost of keeping up the home for the year
• Your spouse didn’t live in the home during the last six months of the year
• Your home was the main home of one of these for more than half of the year:
  • Your child
  • Stepchild
  • Eligible foster child

You must be able to claim an exemption for your child. This applies even if you don’t claim the exemption since you released the child’s exemption to the noncustodial parent.

If you file as head of household, you can claim the EIC if you otherwise qualify for it. However, you can’t claim the EIC if you’re Married Filing Separately.

Do I have to claim the EIC on a state return?

Many states offer their own version of the credit. If you file a state return, the state credit would calculate on it. Review the instructions for the state you’re filing.

Additional information on Earned Income Credit (EIC)

For more information on general Earned income tax credit requirements or claiming the credit, get help from H&R Block. Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.

The post Earned Income Tax Credit: What it is and how to know if you qualify as a taxpayer appeared first on H&R Block.

Learn more about this valuable tax credit and its nuances here.

How much is the Child and Dependent Care Credit worth?

Currently, the Dependent Care Credit is 20% to 35% of qualified expenses. The percentage depends on your adjusted gross income (AGI). The maximum amount of qualified expenses for the credit is:

• $3,000 for one qualifying person
• $6,000 for two or more qualifying persons

How much you can claim phases out depending on your income.

Requirements for the Child Care Tax Credit

To claim this valuable tax credit, the following should all be true:

1. You and your spouse usually file as married filing jointly. (See Filing exceptions below.)
2. You provide the care so you (and your spouse, if married) can work or look for work.
3. You have some earned income. If you’re married and living together, both you and your spouse must have earned income. However, one spouse might be disabled or a full-time student at least five months of the year. If that’s the case, IRS assigns one of these earned income amounts to that spouse:
   1. The higher of $250 or actual income for the month for one child
   2. The higher of $500 or actual income for the month for two or more children
4. You and the person(s) being cared for live in the same home for more than half of the year.
5. The person providing the care can’t be:
   1. Your spouse
   2. Parent of your qualifying child under age 13
   3. Person you can claim as a dependent
6. If your child provides the care, they:
   1. Must be age 19 or older
   2. Can’t be your dependent

If you’re married but not filing jointly with your spouse, you can claim the credit if:

• You paid more than half the cost of maintaining a household for the year. Both you and the qualifying person must have used the home as your main residence for more than half the tax year.
• Your spouse wasn’t a member of the household during the last six months of the tax year.

Don’t leave money on the table

File your taxes to claim the Child and Dependent Care Tax Credit. Our tax pros can help you file in person or virtually, or you can file on your own online.

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Who qualifies for the Child Care Credit?

To claim a Child Care Credit for qualified expenses, you must provide care for one or more qualifying people. (See Qualified expenses section below)

Qualifying persons include:

• A dependent who’s a qualifying child and under age 13 when you provide the care. Usually, you must be able to claim the child as a dependent to receive a credit. However, an exception applies for children of divorced or separated parents. In those situations, the child is the qualifying child of the custodial parent for purposes of this credit. This applies even if the noncustodial parent claims the child as a dependent.
• Spouse or dependent of any age who’s both:
  • Physically or mentally incapable of self-care
  • Has the same main home as you do when you provide the care

Qualified expenses for the Child and Dependent Care Credit

Qualified child- or dependent-care expenses are those you run up while you work (or look for work). They should be related to well-being and protection. They include:

• Expenses for care provided outside of your home. This applies if the qualifying person regularly spends at least eight hours each day in your home. If the qualifying person receives the care in a dependent-care center, the center must comply with all relevant state and local laws. A dependent-care center is one that cares for more than six people for a fee.
• Expenses for in-home care. This includes expenses for:
  • Cooking
  • Light housework related to the qualifying individual’s care
  • The care itself
• Gross wages paid for qualified services, plus your portion of:
  • Social Security
  • Medicare
  • Federal unemployment taxes
  • Other payroll taxes paid on the wages
  • Meals and lodging for the employee providing the services

What expenses don’t qualify for the Child and Dependent Care Credit?

Unfortunately, these expenses don’t qualify for the Child and Dependent Care Credit:

• Transportation costs to and from the childcare facility
• Overnight camp expenses
• Expenses for the education of a child in kindergarten or higher
• Expenses for chauffeur or gardening services

The cost of before- or after-school programs might qualify if the program is for the care of the child. Education costs below kindergarten qualify if you can’t separate those costs from the cost of care. (A good example is nursery school.)

How to claim the Child Care Credit

Luckily, to claim this credit you only need to fill out one extra tax form. Complete Form 2441: Child and Dependent Care Expenses and attach it to your Form 1040 to claim the Child and Dependent Care Credit.

Bonus content: Employer-provided benefits

Some employers provide childcare benefits in addition to the Child and Dependent Care Credit. These are called employer-provided benefits and can include:

• On-site care for their employees’ children
• Direct payment for third-party care
• Accounts earmarked for childcare expenses. Employees can put money from their salaries into these accounts.

If the value of the benefits is more than $5,000, your employer will report everything over $5,000 as taxable income. If the value is less than $5,000, it’s not taxable income.

Some employers offer Section 125 plans. These are also called cafeteria plans or flexible spending accounts (FSAs). They allow employees to reduce their salaries for one or more nontaxable benefits. You can use common flexible spending accounts to pay childcare or medical expenses.

Your W-2, Box 10 will show the amount of child and dependent care benefits your employer provided. You can’t use expenses paid or reimbursed with these benefits to claim the childcare credit. Subtract the Box 10 amount from the amount of the child and dependent care credit you can claim. When your W-2 shows dependent care benefits, you must complete Form 2441 (Form 1040), Part III. This applies even if you’re not claiming a Child Care Credit.

Can you take a child care tax deduction?

No, there are no tax deductions available for child care for individuals—just a credit. However, you might qualify for other credits or deductions. To learn more, read about the top five common tax credits.

More help with claiming the Child Care Tax Credit

If you think you qualify for the Child Care Tax Credit or other tax credits like the Earned Income Tax Credit, or deductions, get help! With many ways to file your taxes with H&R Block, we can work with you in a way that best suits your needs to help maximize your tax credits and deductions.

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But there are some updates to note as what’s covered and even the name of the credits have changed.

In this post, we’ll cover two credits:

1. Nonbusiness Energy Property Credit (now the Energy Efficient Home Improvement Credit)
2. Residential Energy Efficient Property Credit (now the Residential Clean Energy Credit)

1. Nonbusiness Energy Property Credit (Energy Efficient Home Improvement Credit)

With the Inflation Reduction Act of 2022, the Nonbusiness Energy Property Credit was extended through 2032 and renamed the Energy Efficient Home Improvement Credit.

It’s important to note that the credit will follow different rules depending on the year the property is placed in service.

Property placed in service in tax year 2022

For property placed in service prior to 2023, the Nonbusiness Energy Tax Credit is available for energy efficient home improvements that include building envelope components and energy properties (energy efficient home improvements that increased the heating and cooling efficiency of your primary residence).

Building envelope

Eligible items are:

• Insulation material or systems
• Exterior windows, skylights, or doors
• Storm windows and storm doors installed over certain types of windows and doors
• Certain metal roofs
• Certain asphalt roofs

Energy properties

These are home appliances that improve the home’s heating and cooling efficiency. Improvements include:

• Advanced main air-circulating fan used in a natural gas, propane, or oil furnace
• Biomass fuel stoves
• Central air conditioners
• Electric heat pump water heaters
• Electric heat pumps
• Natural gas, propane, or oil furnaces
• Natural gas, propane, or oil water boilers
• Natural gas, propane, or oil water heaters

The maximum lifetime credit for all types of property combined is $500 for tax year 2022 and all prior years. No more than $200 can be for exterior windows. The property must be original use property installed in your main home in the United States.

The nonbusiness energy tax credit can be claimed on your 2022 taxes via Form 5695. Also, when you claim the credit, make sure to reference the manufacturer’s certification statements as to whether the purchase qualifies!

2023 to 2032

The new credit increases from 10% to 30%, of qualified energy-efficient improvements and residential property expenses. It also removes the $500-per-person lifetime credit limit; giving you, the taxpayer, a maximum credit limit of $1,200 per year. The limit per qualifying item is generally $600 ($250 per exterior door up to $500 for all exterior doors).

The new provision also made the following changes:

• Roofs no longer qualify, but air sealing insulation does.
• You can claim the credit for not only a primary residence, but also a secondary one.
• Beginning in 2025, you should include the product ID on tax forms to claim the credit. The credit is still claimable on Form 5695.

This energy tax credit is available for energy efficient home improvements that fall into the following categories:

Residential Energy Efficient Property (REEP) Credit (Now Residential Clean Energy Credit)

The same legislation mentioned above changed the Residential Energy Efficient Property (REEP) credit to the Residential Clean Energy Credit in 2022. The rules below apply to property put in service after Dec. 31, 2021, through December 31, 2034.

However, the value of the credit changes depending on when you’ve installed the property.

The credit rates are:

• 26% for property placed in service during 2021
• 30% for property placed in service from 2022-2032
• 26% for property placed in service during 2033
• 22% for property placed in service during 2034

What property qualifies?

Solar electric, wind, and other alternative energy equipment installed in your home qualifies. But, wait… If your home also has solar panels, there are even more credits you could claim. Learn more about claiming solar credits.

More help with claiming tax credits

Don’t go at taxes alone, especially when you have tax credits on the line. Get the support of a tax pro at H&R Block. In fact, with many ways to file your taxes, our pros maximize the tax deductions and credits you are entitled to optimize your tax outcome.

Make an appointment.

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There’s a good reason to pay attention to changes this year. In fact, the Inflation Reduction Act passed last August changed the existing credit and even added a new credit. (Note: Most of these changes and the new credit will apply for electric vehicles bought after 2022.)

Qualified Electric Vehicle Credit: 2022

In 2022, the available credit you can take is the Qualified Plug-in Electric Vehicle Credit. This non-refundable tax credit is for four-wheeled plug-in electric vehicles that meet particular battery specifications. 

The credit is worth up to $7,500 (depending on battery capacity). But beware… a manufacturing limit applies, so the credit for some vehicles is reduced or unavailable in 2022. Under the new law, cars bought after August 16, 2022, must also meet a “final assembly” requirement. This means that the vehicle’s final assembly must occur in North America. 

Sound like something you qualify for? Claim the credit on IRS Form 8936. 

Clean Vehicle Credit: 2023 to 2032

In 2023, the credit is renamed the Clean Vehicles Credit. There’s also a new Credit for Previously-Owned Clean Vehicles that benefits used electric vehicle buyers beginning in 2023. Read on as we share the details about the cars that qualify for a tax credit.

Who qualifies for the Clean Vehicle Credit?

The Clean Vehicle Credit applies to purchasers of an electric drive motor vehicle meeting certain specifications. It’s worth determining if you qualify, as the credit is worth up to $7,500. The Clean Vehicle Credit can be claimed for vehicles placed in service after December 31, 2022, and doesn’t apply to cars bought after December 31, 2032. The credit is non-refundable, so you won’t get a refund for the unused portion of it. In addition, you can’t carry the credit over to your next year’s return.

To qualify for the Clean Vehicle Credit, you must purchase and place in service a qualified motor vehicle, and the following must be true:

• You own the vehicle, and you’re the first-time owner.
• You started using it in the current tax year.
• Your modified adjusted gross income (MAGI) is equal to or less than $300,000 (Married Filing Jointly and Qualifying Surviving Spouse), $225,000 (Head of Household), or $150,000 for all other filers.
• The vehicle meets one or both of the following (up to $3,750 each for meeting each part):
  • Critical mineral specifications 
  • Battery components specifications

For a four-wheeled vehicle, your vehicle also must:

• Have a battery capacity of at least seven-kilowatt hours (for electric vehicles) or be a qualified fuel cell vehicle
• Meet the North American final assembly requirement (as explained above)
• Have a manufacturer-suggested retail price (MSRP) of no more than $80,000 for vans, SUVs, and pick-ups, and $55,000 for other vehicles
• This credit can be transferred to the car dealer starting in 2024

Finally, in 2023 and after, the manufacturer limitations that applied to the old credit will no longer apply to the Clean Vehicle Credit. That means that some vehicles that didn’t qualify for the credit in 2022 because of the per-manufacturer limit may be eligible in 2023 if they meet the critical minerals, battery components, and final assembly requirements.

Credit for Previously-Owned Clean Vehicles starting 2023

Not just new electric vehicles qualify for a tax credit! In fact, there’s a new credit available for previously owned clean vehicles purchased after December 31, 2022, through December 31, 2032, for up to $4,000.

Here are the details of the Credit for Previously-Owned Clean Vehicles:

• The credit is limited to 30% of the vehicle’s purchase price
• You can claim the credit once every three years
• Your modified AGI must be less than $150,000 (Married Filing Jointly and Qualifying Surviving Spouse), $112,500 (Head of Household), or $75,000
• The vehicle sale price must be $25,000 or less – and the vehicle must be sold by a dealer on the first transfer of the qualifying vehicle
• A Vehicle Identification Number (VIN) is required to claim the credit; also, the model year must be at least two years earlier than the year the vehicle was sold
• This credit can be transferred to the car dealer starting in 2024

How do I claim the EV tax credits for 2022 and 2023?

Claiming credits can be complex, which is why we’re here to help! Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to navigate tax deductions and credits related to electric vehicles.

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Subsidies are given in the United States to help relieve some sort of financial weight or burden and are generally intended to be in the public’s interest by promoting a social good or economic policy.

While subsidies are generally available to businesses, there are also a few subsidies out there for individuals. A common type is a tax subsidy, which is an indirect payment from the government. There are other types, like direct subsidies, which are cash payments, and aren’t offered through tax expenditures.

Some people refer to these as tax subsidies, and one subset of these is known as tax credits. We may use both terms as we discuss this topic. (Other types of tax subsidies include alterations to a tax rate or exempting entities from tax.)

You might know that tax subsidies are out there representing financial support, but you don’t know precisely how they work and how to access them. This post will walk you through the specifics of tax subsidies for individuals.

Ready to tackle how subsidies work? First, you should know it depends on the type. In fact, there are many different subsidies available to individuals and businesses.

Health insurance subsidies

If you’re wondering, “What is a subsidy in health insurance?”, we’ve got more insight. Here are a couple tax credits that people think of as government subsidies:

Premium Tax Credit (Individual PTC Health Insurance Subsidy)

The Premium Tax Credit, otherwise known as the Individual PTC, is a tax credit that helps make certain health care insurance coverage (premiums) more affordable. You’ll receive it as a refundable credit on your tax return. So, even if you owe little or no tax, you can still benefit from the credit by getting a larger tax refund.

Advanced Premium Tax Credit (APTC Subsidy)

This advance tax credit is based on your estimated household income at the time you sign up for Marketplace insurance. It’s paid directly to your insurance provider each month and helps with the premium you pay out of pocket.

When you file your tax return, you compare your advance credit based on estimated income to the credit you qualify to claim with your actual income.

Do I qualify for a subsidy or tax credit?

Not everyone qualifies for an individual government tax credit for healthcare in the United States. At a high level, you must qualify to purchase and use the government-sponsored health insurance Marketplace.

Discover if you qualify for subsidies like the Premium Tax Credit or Advanced Premium Tax Credit.

How do subsidies affect income taxes?

When you file your taxes, the amount of your credit you can take is determined by your adjusted gross income and income tax filing status.

There are a few things to keep in mind with the APTC subsidy:

• If the tax subsidy is the same as the amount paid to your insurance on your behalf, there is no impact on your taxes.
• If you increased your income within the tax year, you may have received a larger credit than what you should have. In this case, you need to pay back a portion or all of the money you received from the government.
• If you earned less income than estimated, you may be entitled to a higher tax subsidy. If this is the case, you’ll get a refund that will be applied to your tax return.

How to file taxes with a tax subsidy

If you, your spouse, or dependents claim a healthcare tax subsidy, you must notate it on your taxes. To do this attach Form 8962 to your individual tax return. Attaching the form can help you avoid your return being rejected when you e-file (shown as Reject Code F8962-070).

To help you complete Form 8962, the health insurance exchange will send you an informational tax return via Form 1095-A. Can’t find your Form 1095-A? You can get a copy from www.healthcare.gov or your state’s exchange portal if you received coverage from a state exchange.

Claiming tax subsidies on your return? Turn to H&R Block for help

Interested in claiming tax credits like the healthcare-specific federal government subsidies as listed above?

You can rely on H&R Block to help navigate you through everything from tax preferences, incentives, and benefits to tax breaks. Learn about the ways to file taxes with H&R Block.

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How will these advance CTC payments affect your tax return? What if you didn’t receive any of the advance payments or opted out midway?  You can find explanations of common scenarios in our Child Tax Credit infographic below.*

Need help? You can rely on our expertise to get the credits you deserve, whether you  file taxes online, or with an H&R Block tax pro. 

*Keep in mind: Every tax situation is different. The impact of the Child Tax Credit on your taxes may be complicated, and not everyone gets a refund.

Click to view larger image 

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