Tax professionals should make sure they do not overlook tax credits for the benefit of their clients.
- Credit for prior year minimum tax
The minimum tax credit, if any, for alternative minimum tax (AMT) they incurred in prior tax years (timing/deferral items) and any credit carry-forward to next year.
- Credit for tax on undistributed capital gain
If a regulated investment company (commonly called a mutual fund) or real estate investment trust (REIT) paid a tax on your capital gain distribution, you are allowed a credit for the tax.
- Credit to holders of tax credit bonds
Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. You may be able to take a credit if you are a holder of clean renewable energy bonds (issued before 2010), new clean renewable energy bonds, qualified energy conservation bonds, qualified school construction bonds, qualified zone academy bonds or Build America Bonds.
- Credit for excess social security tax
A credit for taxpayers who worked for two or more employers and had too much Social Security tax withheld from their pay. This is a refundable tax credit, which means taxpayers may get money back even if they have no tax withheld.
- Earned income Tax credit
The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return. EITC reduces the amount of tax you owe and may give you a refund.
Income taxes paid or accrued during the year to a foreign country or U.S. possession can be deducted as a credit against your U.S. income tax or included as an itemized deduction.
The mortgage interest credit is intended to help lower-income individuals own a home. If you qualify, you can take the credit each year for part of the home mortgage interest you pay.
- Education credits
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity credit and the Lifetime Learning credit.
- Retirement savings contributions credit
You may be able to take this credit if you, or your spouse if filing jointly, made contributions to a traditional or Roth IRA, elective deferrals to a 401(k) or 403(b) plan or to a governmental 457, SEP, or SIMPLE plan, voluntary employee contributions to a qualified retirement plan or contributions to a 501(c)(18)(D) plan.
- Health coverage tax credit
The Health Coverage Tax Credit (HCTC) is a tax credit that pays 72.5 percent of qualified health insurance premiums for eligible individuals and their families. The HCTC acts as partial reimbursement for premiums paid for qualified health insurance coverage and can now be claimed for qualified coverage through 2019.
The premium tax credit is a refundable credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through a Health Insurance Marketplace.
- Adoption credit
A nonrefundable tax credit for qualified adoption expenses paid to adopt an eligible child. The credit may be allowed for the adoption of a child with special needs, even if you do not have any qualified expenses. The credit is reduced if your modified adjusted gross income (MAGI) falls between $201,010 and $241,010; and is zero if your MAGI is above $241,010. In addition, there is an income exclusion for employer-provided adoption assistance.
- Child and dependent care credit
A credit for the costs of care for a qualifying individual to allow you to work or look for work. The dollar limit on the amount of the expenses you can use to figure the credit is $3,000 for the care of one qualifying individual or $6,000 for two or more qualifying individuals. The amount of your credit is between 20 and 35 percent of your allowable expenses. The percentage you use depends on the amount of your adjusted gross income.
- Credit for the elderly or the disabled
- Child tax credit
- Additional child credit
This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.
- Alternative motor vehicle credit
Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.
- Plug-in electric drive motor vehicle credit
The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
- Residential energy credit
Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and fuel cell property installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.
Please do not hesitate to contact me should you have any question