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5. Tax credits What are tax credits? Your adjustments, deductions, and exemptions reduce your...

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5. Tax credits What are tax credits? Your adjustments, deductions, and exemptions reduce your taxable income. Tax credits, on the other hand, are directly applied to the tax that you pay. You may take tax credits regardless of whether you itemize deductions. Many credits are limited, based on income levels, so the amount of a credit may be reduced for high-income taxpayers. The following statement refers to refundable and nonrefundable tax credits. A tax credit that reduces your income tax liability to below zero with the excess being returned to you is Page 2 of tax Form 1040 lists the available tax credits. The nonrefundable tax credits are listed in the Tax and Credits section of the form. Select the tax credits. Check all that apply. Child tax credit Casualty and theft loss tax credit Foreign tax credit Charitable contributions tax credit Education credits (lifetime learning credit) The Payments section of Page 2 of tax Form 1040 lists refundable tax credits. Select these tax credits from the list. Check all that apply. Earned income tax credit Credit for federal tax on fuels Additional child tax credit Student loan interest tax credit Health savings account tax credit

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