What is the earned income tax credit? Q.What is the earned income tax credit? A.The earned income tax credit subsidizes low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income until no credit is available. Read more about What is the earned income tax credit?
What is the difference between refundable and nonrefundable credits? Q.What is the difference between refundable and nonrefundable tax credits? A.Taxpayers subtract both refundable and nonrefundable credits from the income taxes they owe. If a refundable credit exceeds the amount of income taxes owed, the difference is paid as a refund. If a nonrefundable credit exceeds the amount of income taxes owed, the excess is lost. Read more about What is the difference between refundable and nonrefundable credits?
How did the 2021 American Rescue Plan Act Change the Child Tax Credit? Q.How did the 2021 American Rescue Plan Act Change the Child Tax Credit? A.For 2021, the child tax credit provided a credit of up to $3,600 per child under age 6 and $3,000 per child from ages 6 to 17. If the credit exceeded taxes owed, families could receive the excess amount as a refund. From July 2021 to December 2021, half of the credit was automatically paid on a monthly basis to most families in advance of their filing a tax return. Families could opt out of advance payments. Read more about How did the 2021 American Rescue Plan Act Change the Child Tax Credit?