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Originally Posted by shawnb
Well, for my 2005 year, I had between 28% and 33% deducted from my paychecks, totalling $43k (after $25k deductions). For the first year since I got married I received a refund of a whopping $1,700 (usually, since I married 5 years ago, I owe about $500). I doubt the credit will help me if it doesn't actually refund money back if I don't owe this year. But, it'll certainly help to make sure I don't owe at all.
I try to make my money work for me in the meantime, I actually don't like refunds or owing the IRS at the end of the year. I'd rather it be invested in the meantime, making me more money in the long run, but thats just me, not most Americans.
Thanks,
Shawn
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Of course the tax credit will help you. Let's assume that the IRS finalizes the estimate of $2,100 for the 2006 HCHII. It will reduce your tax liability by $2,100. Whether or not you get a refund or owe money is based upon taking your tax liability and subtracting how much you have already paid to the IRS through your paycheck deductions. If your tax liablity is greater than your paycheck deductions, you still owe the IRS money. If your paycheck deductions are greater than your tax liability, the IRS owes you money. As you can see, reducting your tax liability can only benefit you. The only thing is that you can have a zero tax liability, but you cannot have a negative tax liability. Most people will not have a zero tax liability.
Examples:
The $2,100 hybrid tax credit would turn owing $500 to the IRS into them owing you $1,600.
The $2,100 hybrid tax credit would turn your $1,700 refund into a $3,800 refund.
Again, these assume that your tax liability is not reduced to zero.