Hi, I'm Rex. For most taxpayers, the child tax credit is not refundable. That means if you only owe $1,000 in taxes but you have two qualifying children to claim, making the tax credit worth $2,000, your liability will be reduced to zero. And that's it, the rest of the credit just goes away. There is a special circumstance, however, where the credit can be refundable, meaning the excess is returned to you as a refund. This is known as the additional child tax credit. Calculating this additional bonus can become complicated, which is why it's recommended that you use professional tax software, which can assist you with one or more qualifying children. Along with $3,000 or more of earned income, you may qualify to claim a refundable credit worth up to 15% of your earned income that exceeds $3,000. Earned income is any wages or compensation resulting from employment or services provided, including combat pay that is non-taxed. If your earned income is less than $3,000 and you have three or more qualifying children, you may receive a credit if you paid more in Social Security taxes than you earned in income. For more information, visit eatacts.com.
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Schedule 8812 2024 Form: What You Should Know
The Alternative Minimum Tax (AMT) is a tax designed to apply to persons who owe federal income tax at a rate higher than their marginal tax rate. The AMT reduces the amount of tax (above your marginal tax) you owe by the greatest of: 20% of the excess adjusted gross income over the tax brackets; or 100,000 The Alternative Minimum Tax doesn't apply to any income earned by a partnership, S corporation, or individual. The standard deduction is reduced by 5,000 for each additional child you have. For example, if you have 2 kids, and you have a 14,000 standard deduction, you'd have to reduce your standard deduction by a total of 24,000, or 10,000 for each child. So if you had one child with a standard deduction of 5,000 and two kids with standard deductions of 10,000, you're looking at a total income for 2024 of 22,500 (3 × 14,000 and 2,500 = 14,000 and 2,500). The Alternative Minimum Tax (AMT) reduces the amount of tax (below your marginal tax base, or “marginal threshold”) you pay, beginning at 25,700 for the 2024 tax year. For example, if you pay 3,700 in tax on 24,500 of income, the Alternative Minimum Tax kicks in at a rate of 35%. In 2018, this means that if you don't have any children, you'll owe exactly 0 in taxes because no tax is due. If you have two kids for instance, you'll end up paying 2,500 in AMT, however you'll have to pay 10,750 (35% x 2 = 10,750) because your standard deduction is reduced by 10,750. Here are the AMT income cut-offs: Single filers in 2018: 9,325 Married Joint Filers: 18,350 Heads of Household: 16,700 Exceptions to AMT: Income from self-employment is not subject to AMT; Qualified dividends or annuities are not subject to AMT; Charitable contributions, including to a life insurance contract, may be made tax-free. The AMT is calculated at a flat rate that applies regardless of filing status.
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