stessier wrote:Does anyone know how the tax credits work?
So if I qualify for the $7500 tax credit, does that mean when I file my taxes next year I get to deduct that from what I owe? Example, I do my taxes and find I paid $10,000 and owed $10,000 - I then apply the $7500 credit meaning I overpaid by $7500 and get that back as my Federal return?
Tax credit vs Tax deduction
https://www.irs.com/articles/tax-credit ... deductions
There are a few basic differences between tax credits and tax deductions. Tax credits provide a dollar-for dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes. On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax (0.25 x $1,000 = $250).
A tax credit is always worth more than a dollar-equivalent tax deduction, because deductions are calculated using percentages. Referring to the numbers above, you can see that a $1,000 credit offers $750 more in savings than a $1,000 deduction.
Edit: The answer is probably. You probably get everything, depending on the credit, so long as you don't reduce your liability to less than 0.
Tax Credits
Tax credits can help reduce your liability dollar-for-dollar. However, they cannot reduce your income tax liability to less than zero. In other words, your gross income tax liability is the amount you are responsible for paying before any credits are applied.
The majority of tax credits are non-refundable. With non-refundable tax credits, any excess amount expires in the year in which it was used, meaning that the additional amount is not refunded to you. There are some refundable tax credits, though, and these can be used to help grow your tax refund.
To get a better idea of how tax credits work and whether or not you qualify, you need to know what is available to taxpayers in your situation — such as your filing status, age, employment, and education. It is important to remember that just because you qualify for one type of tax credit does not mean that you qualify for the rest.
How much are tax credits worth? That depends on the particular tax credit you’re talking about. And just as the amount of each tax credit is different, so are the qualification guidelines. Since a credit helps reduce the amount of money that you pay in income tax, it is essential that you are 100% accurate with this information. If you are unsure of whether or not you qualify for a tax credit, it’s recommended that you check with a tax professional before claiming the credit on your income tax return.
While tax credits are less common than tax deductions, they are available for things such as adopting a child, buying a first home, child care expenses, home office expenses, and caring for an elderly parent. Additionally, there are various business tax credits that you may be able to consider.
