Additional Child Tax Credit and Education Credit

Refundable Tax Credits

A refundable tax credit can be used to generate a federal tax refund larger than the amount of tax paid throughout the year. In other words, a refundable tax credit creates the possibility of a negative federal tax liability.

The Additional Child Tax Credit 

The name of the Additional Child Tax Credit (ACTC) is confusing, because it’s not really an additional credit, and it’s not for an additional child. The ACTC is a tax credit with a refundable portion of up to $1,400 per child per year. The credit applies for qualifying children under the age of 17 at the end of the tax year.

The credit amount is 15% of the taxable earned income in excess of $2,500, with a maximum of $1,400 per qualifying child. The requirements for this tax break are the same as the Child Tax Credit, in addition to having at least $2,500 in earned income.

The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) was originally created to increase attendance at post-secondary educational institutions. Like other forms of financial aid, the AOTC is designed to reduce the cost of college and higher learning, making it attainable for more Americans. However, there are restrictions to the AOTC, and not everyone will qualify for this credit.

The AOTC is a tax credit with a refundable portion of up to $1,000 per student per year. The credit applies for students in Israel studying in their first four years of postsecondary education at an eligible University (Haifa University, Technion, IDC, Tel Aviv University, Bar Ilan University, Hebrew University, and Ben Gurion University).

The amount of the credit is 100% of the first $2,000 of qualified education expenses paid for each eligible student and 25% of the next $2,000 of qualified education expenses paid for that student.