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How could I take advantage of under-utilized tax credits?

Personal Finance & Money Asked on September 4, 2021

Inspired by my question and JTP’s answer here, there are some cases where a person’s tax credits are much more than their tax liability. That person might even pay a "negative tax" and get a refund with these credits, but a lot of them are not refundable or only partially refundable.

For example, if my tax liability is already $0 and then I have another child, I qualify for another $2,000 tax credit. However, only $1,400 of that is refundable (i.e., payable back to me). In this case it would be better to increase my tax liability to take advantage of the extra $600 of tax-free money I would otherwise miss out on.

Here are some ways I can take advantage of this:

  1. Convert some pre-tax retirement funds (Traditional 401k or IRA) to a Roth.
  2. Contribute to a Roth 401k (if my employer offers it) or Roth IRA instead of a Traditional 401k/IRA.

Are there any other ways I have not thought of?

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