Tax Credits for 2022 Tax Returns
A tax credit reduces your actual taxes; it decreases tax payments or increases a tax refund. In comparison, tax deductions reduce your taxable income. Tax credits help you keep bigger slices of an apple; the more tax credits you claim, the more of your hard-earned money you get to keep, reduce taxes owed, or increase your tax refund. What do tax credits do for you? There are refundable and non-refundable tax credits; let's see what the difference is.
Refundable Versus Nonrefundable Tax Credits
With a nonrefundable tax credit, you will reduce some or all of your tax liabilities. The reduction amount is determined by your tax liability - as the result of your adjusted gross income or AGI and applied tax brackets - minus your total non-refundable tax credits.
For example, if your tax liability was $3,000 in federal taxes and you qualify for a $5,000 nonrefundable tax credit, your tax liability would be zero at the time of the tax credit calculation. You will not receive the additional $2,000 ($5,000 minus $3,000 = $2,000) or the full tax credit amount - in this case, $5,000 - if you are entitled to the total nonrefundable tax credit. In the event that your tax liability at the time when the nonrefundable tax credits are applied is zero, you would not benefit from the tax credits at all.
On the other hand, a refundable tax credit is a dollar amount that can be fully refunded back to you. For example, if you are a low-to-moderate income earner, you will likely benefit from the Earned Income Tax Credit or EITC. This tax credit is fully refundable and can be part of your tax refund when you file. Calculate your EITC here before you eFileIT.
One other important point is that at the time when the tax credits are applied, the taxpayer could not show a tax refund in the tax calculation process - a potential tax refund will show later. Even if your tax liability was reduced to zero due to non-refundable tax credits, you could still receive a tax refund upon completion of your tax return; for example, if refundable tax credits are still applied plus paycheck tax withholdings shown on your W-2 wage form or other Form 1099 related tax estimates.
In summary: The vast majority of taxpayers will reduce their tax liability with non-refundable tax credits. Even if the tax liability was reduced to zero, a taxpayer could still receive a tax refund on the final 1040 IRS tax return. Thus, even if a taxpayer expects a tax refund on the 1040 Tax Form, it should not be concluded that nonrefundable does not apply or not benefit a taxpayer in this situation.
With refundable tax credits, you can receive an IRS tax refund
if the tax credit is larger than the amount of tax you owe.
We do realize this sounds all very convoluted to say the least; we suggest you start and prepare a tax return on eFile.com. Let the eFile.com Tax App do these assessments and calculations for you so you can be certain to keep more of your hard-earned money. After you have reviewed the tax return results, you can then e-file your taxes via your account so you do not need to worry about mailing anything. See how the eFile platform works before you start for free.
See below for details and examples of nonrefundable and refundable credits.
Non-refundable Tax Credits
Below is a table of nonrefundable tax credits with helpful links and calculators. eFile will calculate these for you when you file your return online through the online tax preparation app.
Use the CAREucator tax tool
to see if you qualify for this credit; this credit can offset the expenses of paying for childcare. Note
: This tax credit was refundable for your 2021 Return only, it is nonrefundable for 2022 and all other years - details on the linked page.
This credit can be used to offset your tax liability if you are 65 or older and/or disabled while meetings certain qualifications. If you are 65 or over as of 2022, you may be entitled to an additional $1,400 - $1,750 in standard deductions
- eFile will calculate this all for you and include the Elderly and Disabled Credit if you qualify on Schedule R and include it with your Form 1040 or 1040-SR
Get paid and rewarded for saving for retirement! The Saver's Credit may allow you to reduce your income tax for making contributions to a retirement plan
. View the eligibility requirements on the linked page and see if you may be eligible for a credit of up to $2,000.
Residential Energy Efficiency Tax CreditRenamed the Residential Clean Energy Credit in 2023
If you made energy saving improvements to your home
by installing an earth-friendly energy source, you may be able to take advantage of the Residential Energy Efficient Property Credit or Residential Clean Energy Credit. Additional credit amount may be carried over to your next tax return.
The Qualified Plug-In Electric Drive Motor Vehicle Credit can be worth up to $7,500 in nonrefundable credit. Important:
beginning in 2023, qualifying electric and hybrid vehicles may be eligible for a fully refundable $7,500 credit which will be renamed the Clean Vehicle Credit. See also: tax credit for purchasing a hybrid
The Alternative Motor Vehicle Tax Credit is for placing a qualified fuel cell vehicle in service and may only be claimed by the original purchaser of the vehicle before 2017.
The credit for paying interest on a home mortgage is claimed with your tax return and e-filed via Form 8396. This credit can only be claimed if a Mortgage Credit Certificate is used by the state or local government. This is separate from the Mortgage Interest Deduction
Credit to Holders of Tax Credit Bonds
This credit applies to holders of qualified tax credit bonds including new qualified zone academy bonds, clean renewable energy bonds, qualified energy conservation bonds, and qualified school construction bonds.
General Business Credit
This is a collection of various credits that can be claimed to promote business activities such as research, investment, and providing childcare services.
click image to enlarge
Credit Carryforward or Carryover
A credit carryforward, also called a carryover, allows you to apply a leftover amount of a previous year tax credit to a current year tax return. The eFile.com software will allow you to enter the carryover amount from the previous tax year. We show an example of this in the screenshot here for the Adoption Tax Credit.
Refundable Tax Credit
A refundable tax credit is a dollar-for-dollar payment to you. If you qualify for a refundable tax credit, you will receive the amount you are entitled to regardless of the dollar amount of taxes you might owe or the size of your tax refund. Let's say you owe $3,000 in federal taxes and you qualify for a $5,000 tax credit. The IRS will reduce your owed taxes to zero and pay you the remaining $2,000 ($5,000 minus $3,000 = $2,000). Or, your tax refund is $2,000 and you qualify for a $3,000 tax credit, your refund effectively would increase to $5,000. In other words, a refundable tax credit will pay you the full amount you are entitled to regardless on the amount of taxes you owe or the size of your tax refund - eFile will help claim all the tax credits you qualify for.
The Best-Known Refundable Tax Credits
The table below summarizes some of the most common and beneficial tax credits. Included are links to more information and calculators for the credits.
The CTC helps with the many expenses of raising a child; this credit is partially
refundable. Use the CTC calculator or CHILDucator
to see if you qualify for this tax credit. The Additional Child Tax Credit is the refundable part of the Child Tax Credit. Note:
The CTC was fully refundable in 2021 only; you cannot claim the advance Child Tax Credit payments
on your 2022 Return.
This credit can be used to offset the cost of a healthcare premium via the Healthcare Marketplace
. This tax credit is typically an advance payment
which is given to the payer throughout the year. At the end of the year, one who receives health insurance this way is required to file a tax return to figure their PTC amount.
Claim a tax credit for going to college; apply for this credit for help with paying for higher education
for you or your qualifying dependent
. This credit is partially refundable and can be worth up to $2,500.
Beginning in 2023, claim a fully refundable credit of up to $7,500 for buying a new plug-in hybrid or electric vehicle or a used clean vehicle for up to $2,500 in credit.
As a homeowner or resident, claim a credit for installing an alternative fuel property your home, including a charger for your electric vehicle or other green property.
The refundable Credit for Sick Leave and Family Leave for Certain Self-Employed Individuals is filed via IRS Form 7202
. You can file back taxes
to claim this credit as it is not relevant for 2022.
This tax credit is for businesses only who paid certain wages to employees due to hardship caused by COVID-19. As an employer, you may be entitled to this credit for 2020 and/or 2021
After getting your amounts for applicable credits using the calculators above, see this free and simple TAXstimator below. In the Credits portion, input the amounts and it will help accurately calculate your 2022 Return refund or taxes owed.
Tax Credits Versus Tax Deductions
Above-the-line tax deductions reduce your taxable income. As a result, on your tax return Form 1040, you will have your adjusted gross income or AGI which includes certain deductions or adjustments. In addition to above-the-line deductions, there are standardized or itemized deductions. A standardized deduction is an amount you are entitled to deduct from your AGI based on the filing status. With an itemized deduction, you list each item you qualify for as a deduction. You can only claim a standardized or itemized deduction on your tax return. Which deduction is best for you? The eFile Tax App will calculate this for you and apply the deduction method that is more advantageous for you in addition to calculating and applying all your tax credits.
Tax deductions are not direct payments to you as tax credits are. For example, if your total annual income was $50,000 and you qualify for $12,950 in tax deductions, your taxable income would be reduced to $37,050. By reducing your taxable income, you would be taxed based on your filing status and personal tax bracket. In order to claim or qualify for most tax credits (except some retirement contributions) for the current tax year, the payments or expenses have to occur during the tax year or no later than December 31.
Attention: review extended or expired tax breaks, tax credits, and tax deductions.
Tax Tip: When you prepare your tax return on eFile.com, the tax app will automatically generate the correct form(s) for you to report your tax credit or deduction based on the information you provide. The software ill suggest if you should itemize deductions or use the standardized deduction method on your tax return. We want you to keep more of your hard-earned money!
Read on for details on popular tax credits; refer to the table above to see whether or not it is refundable.
Family, Parent Tax Credits
See a detailed overview of all child-related tax credits with links to tax calculators and tools.
Child Tax Credit
The Child Tax Credit is worth up to $2,000 for each qualifying child which can be claimed per qualifying dependent as long as you had earned income of at least $2,500. Up to $1,500 of the credit can be refundable for each qualifying child as the Additional Child Tax Credit. This tax credit is meant to provide help to parents with qualifying children. See details on the Additional Child Tax Credit and the enhanced CTC for 2021 only which does not apply to 2022 Taxes. The Child Tax Credit is different from the Child and Dependent Care Credit.
Use the free eFile.com "CHILDucator" Child Tax Credit tool to find whether or not you qualify for the Child Tax Credit.
Child and Dependent Care Tax Credit
There are certain cases where you may claim a credit on family-related expenses if you are working, in school, or are in the process of looking for a job. Depending on the particulars of the situation, you may reduce your tax by claiming the Child and Dependent Care Tax Credit on your federal income tax return for any expenses related to payments made to someone to care for a child under age 13, a qualifying spouse, or a dependent.
Adoption Tax Credit
The Adoption Tax Credit is designed to help parents with the expenses involved in adopting a qualified child. An eligible child is any child under 18 or a child with special needs that lacks the ability to care for him or herself. The maximum available Adoption Tax Credit amount for Tax Year 2022 is $14,890 per qualifying child.
See more information on children tax credits and tax credits for parents with dependents and children.
Credit for the Elderly and Disabled
You may be able to claim the Credit for the Elderly or the Disabled if you are 65 years of age or older or if you retired on total and permanent disability and have taxable income. To take the credit, your income must not exceed certain limits.
Employee, Worker Tax Credits
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a credit for taxpayers who earn low to moderate incomes. The EITC can reduce your taxes and may result in a tax refund which helps more working families and individuals keep more of the money they earned.
Use our free "EICucator" Earned Income Tax Credit tool to find out whether or not you qualify to claim the credit on your tax return.
Foreign Tax Credit
The Foreign Tax Credit was implemented to reduce a double tax burden for citizens earning income outside of the United States - once by the United States and again by the foreign country where the income is derived. See more information on foreign earned income and taxes.
U.S. citizens and resident aliens from the United States working or living in a foreign country during the year are allowed the same tax credits as U.S. citizens and residents from the U.S. living in the United States. Check out our detailed summary on tax credits for Americans living or working abroad.
Medical Tax Credits
Premium Tax Credit
Individual taxpayers and families may be able to claim the refundable Premium Tax Credit if they have low to moderate incomes and purchased health insurance through the Health Insurance Marketplace at HealthCare.gov. They can have the credit paid in advance to their insurance company in order to decrease their monthly premium payments or claim all of the credit on on their tax return.
Tax Credits for Education
Student Tax Credits
There are two major education tax credits available for both new and continuing students: the American Opportunity Credit and the Lifetime Learning Credit. Each credit offers special advantages to students, but both credits may not be claimed by or for the same student in the same year.
The American Opportunity tax credit is a partially refundable tax credit. This tax credit allows for up to 40 percent of the credit as a tax payment if you qualify to claim this credit for education expenses. When you use eFile.com, the tax app will separately calculate the refundable and nonrefundable portion on Form 8863 and eFileIT.
See our complete list of many student tax related topics.
Retirement Tax Credits
Saver's Credit (Retirement Savings Contribution Credit)
The Saver's Credit, formerly known as the Retirement Savings Contributions Credit, helps middle-income families and individuals save for retirement if they contribute to a retirement plan.
For Tax Year 2022, the Saver's Credit allows taxpayers to reduce their income tax dollar-for-dollar by up to $1,000 ($2,000 for married filing jointly), unchanged from 2021. The exact amount of the credit depends on their income, filing status, and the total amount of their qualified contributions.
Information on Tax Breaks and Savings
TurboTax® is a registered trademark of Intuit, Inc.
H&R Block® is a registered trademark of HRB Innovations, Inc.