by Civic/ LivingPower Nov/Dec 2023
You may be familiar with a few personal itemized deductions to help reduce your tax bill, but maybe you’re not as familiar with “tax credits.” Here are four categories of tax credits that may help you find more than pennies under your couch cushions.
Refundable vs. nonrefundable credits
Taxpayers whose tax bill is less than the amount of a refundable credit can get the difference back in their refund. However, once your liability is zero, you won’t get any leftover amount back as a refund for nonrefundable tax credits. In other words, the taxpayer gets a refund only up to the amount owed.
Earned Income Tax Credit
A refundable tax credit for moderate- and low-income taxpayers with or without qualifying children is the Earned Income Tax Credit. Special rules apply to military members, clergy members, and those with disabilities. Visit the IRS’ EITC Assistant webpage to learn whether you’re eligible.
Energy efficient property credit
Earn more green when you go green! This allows for a credit equal to the applicable percent of the cost of qualified property such as solar electric property, solar water heaters, geothermal heat pumps, small wind turbines, and fuel cell property. Various limitations and applicable percentages are found on the IRS’ Energy Incentives for Individuals webpage.
Electric vehicle tax credits
Do you have the drive for this tax credit? You may qualify for a credit of up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The credit is available to individuals and their businesses. To qualify, you must buy the vehicle for your own use and use it primarily in the U.S. Income restrictions apply, so check with your tax or financial professional for details.