What are credits and how do they affect my tax return? | IOOGO

What are credits and how do they affect my tax return?

A tax credit reduces your tax liability, the taxes owed after adjustments and deductions are applied. Some credits are based on your life situation, like the Child Tax Credit and the Earned Income Credit. Some tax credits are given as an incentive, like the Tuition and College Expenses credit.

There are two types of credits, refundable and non-refundable. Non-refundable credits will reduce the tax you owe down to $0.00, but not any less. The less tax you owe, the better chance of getting some of the taxes you paid refunded to you. Refundable credits will reduce your tax liability to $0.00 and the remainder gets refunded to you!

Certain credits require that you have proof in order to claim them. You do not have to submit the proof but don’t get rid of your statements just yet. Keep your forms in case of a future audit. Look for the document icon next to the credit to determine which credits may require proof.