While tax deductions lower the portion of your income that can be taxed, tax credits reduce the amount of tax you owe. The amount of your tax credits lowers the amount of tax you owe. There are two types of tax credits: non-refundable and refundable.

Non-refundable tax credits can reduce tax owed to as little as zero. Examples of non-refundable tax credits include retirement savings, education, and child care expenses.

Refundable tax credits allow you to get a refund past zero tax liability. Examples of refundable tax credits include:

– The Earned Income Tax Credit – If you are a low or moderate-income working family with children, you may be eligible for up to a $6660 tax credit.

– American Opportunity Tax Credit – If you are paying tuition for an eligible student, you may qualify for up to a $2500 tax credit per student.

– Additional Child Tax Credit – The additional Child Tax Credit allows for $1,400 of the regular Child Tax Credit to be refundable.

Tax credits are also available at the state level. Some examples of Arizona tax credits in 2020 are:

– Contributions to qualifying charitable organizations

– Contributions to qualifying foster care organizations

– Public school tax credit

– Credit for contributions to certified school tuition organization

A to Z Accounting can help you take advantage of all the latest tax credits to maximize your return. Call us at 520-318-4912 for help.