Non-Refundable Tax Credits

The vast majority of tax credits you can apply for on your federal return are non-refundable, meaning that they cannot exceed your total tax liability. (Refundable credits can, resulting in payment from the government.) These credits include the Lifetime Learning Tax Credit, the Retirement Saver’s Tax Credit and the Child and Dependent Care Credit.

The Lifetime Learning Tax Credit is an education credit not limited to undergraduate students, but as the name indicates, is available to students of any age pursuing higher education goals. A student can decrease his or her tax liability by up to $2,000 using this tax credit: 20% of the cost of tuition, fees and books. You do not even have to be seeking a degree to claim this tax credit, but can merely be taking courses for enrichment or to improve job skills. However, if you are a single filer who makes over $60,000 a year (or a married filer who makes over $120,000 a year) you cannot claim the tax credit. You may claim this tax credit if paying tuition on behalf of your dependents, but the total amount you claim cannot exceed $2,000.

The Retirement Saver’s Tax Credit rewards taxpayers for contributing to an employer-sponsored retirement plan or an individual retirement arrangement (IRA). To claim this tax credit, you must have income of less than $27,750 if single or widowed ($41,625 if you are head of the household, and $55,500 if you are married and filing jointly). You also must have been born before January 2, 1992 and must not be a full-time student or someone else’s dependent. The tax credit allows you to decrease your liability by up to $1,000, or $2,000 for joint filers.

If you have expenses related to paying a caregiver to care for your child or other dependent, you may be able to claim the Child and Dependent Care Expenses Tax Credit. The child or dependent must have been 12 years or younger when the care was provided, or else must be physically and/or mentally unable to care for themselves (such as an impaired spouse.) You must have been working or looking for work during the times of day the care was provided. If you qualify for this tax credit, you can be reimbursed for up to 35% of your expenses.

These are just a few of the non-refundable tax credits available for the 2010 tax year. Consult a tax professional to see which other tax credits you may be eligible for.

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