Archive for Tax Credit
2012 federally declared disaster areas issued by the department of Homeland Security can be useful if you are uncertain or require specific verification.
The most important thing to remember about the non-business energy property credit and the residential energy efficient property credit is that not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement IN YOUR TAX FILE JUST IN CASE YOU GET AUDITED. Also be sure to understand if the product’s certification meets the standards as some manufacturers seem to very liberally throw around the phrase “energy efficient.” The IRS has offered guidance in these regards and the certification can usually be found on the manufacturer’s website or with the product packaging.
If you’re eligible, you can claim both of these credits on IRS Form 5695 Residential Energy Credits regardless if you itemize your deductions on Schedule A or not. The differences between these credits is worth noting though.
The Non-business Energy Property Credit is generally intended for homeowners who install energy-efficient improvements. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. If you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. As it currently stands qualifying improvements must have been placed into service in your principal residence located in the United States before Jan. 1, 2012.
Residential Energy Efficient Property Credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines. The credit, which runs through 2016, is 30 percent of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. Generally, you may include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; geothermal heat pumps qualify only when installed on or in connection with your main home located in the United States.
Energy Efficient Home Credit is applied for using IRS Form 8908. This form is used by eligible contractors to claim a credit for each qualified energy efficient home sold or leased to another person during the tax year for use as a residence.
Energy Efficient Appliance Credit is applied for using IRS Form 8909. Manufacturers of qualified energy efficient appliances including eligible dishwashers, clothes washers, and refrigerators) use this form to claim the energy efficient appliance credit. The credit is part of the general business credit reported on Form 3800, General Business Credit.
For tax years 2010 to 2013, the maximum credit for eligible small business employers under the Small Business Health Care Tax Credit is 35 percent of premiums paid and for eligible tax-exempt employers the maximum credit is 25 percent of premiums paid. Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.
Start by determining if your organization qualifies for the credit by assessing whether it has less than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and your organization pays at least half of employee health insurance premiums. If your organization meets this criteria it is referred to as a “qualifying business.” Next use IRS Form 8941 Credit for Small Employer Health Insurance Premiums. Last use IRS Form 3800, General Business Credit, to claim the credit.
Tax-exempt organizations can use IRS Form 8941 to calculate the credit and then claim the credit on IRS Form 990-T, Exempt Organization Business Income Tax Return.
If your organization couldn’t use the credit in 2011 there may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.
According to IRS Publication 970 the modified version of the Hope Credit is now referred to as the American Opportunity Tax Credit (AOTC) and extended through 2012. The AOTC is available for the first four years of post-secondary education. It has been expanded so that qualified tuition and related expenses now include expenses for course books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Additionally:
• The credit is equal to 100% of the first $2,000 spent and twenty-five percent of the next $2,000 per student each year. The full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
• Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
• You cannot claim the tuition and fees tax deduction in the same year that you claim the AOTC or the Lifetime Learning Credit. You must choose to either take the credit or the deduction, whichever is more beneficial.
The Lifetime Learning Credit helps parents and students pay for post-secondary education. The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the Hope Credit, the person need not be enrolled at least half-time. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.
There is no limit on the number of years the Lifetime Learning Credit can be claimed for each student. However, you cannot claim the AOTC and Lifetime Learning Credit for the same student in one year. The Lifetime Learning Credit in my opinion may be particularly helpful to graduate students, students who are only taking one course, and those who are not pursuing a degree.
Generally, you can claim the Lifetime Learning Credit if all three of the following requirements are met:
1. You pay qualified education expenses of higher education.
2. You pay the education expenses for an eligible student. The eligible student is yourself, your spouse, or a dependent for which you claim an exemption on your tax return.
3. If you are eligible to claim the Lifetime Learning Credit and also eligible to claim the AOTC for the same student in the same year, you can choose to claim either credit, but not both.
If you pay qualified education expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means that you can claim the AOTC for one student and the Lifetime Learning Credit for another student in the same year. Both Credits are claimed on IRS Form 8863 and answers to additional questions can be found here.
According to Internal Revenue Code Section 21, the maximum tax credit as of this posting date remains at $1,050 (35% of $3,000) for one qualifying individual and $2,100 (35% of $6,000) for two or more. This credit is for expenses paid for the care of your qualifying children under age thirteen, or for a disabled spouse or dependent, to enable you or your spouse (if Married Filing Jointly) to work or look for work.
A qualifying person is a dependent child, age twelve or younger and/or your spouse or other certain individuals who are physically or mentally incapable of self-care.
In order to qualify you (or your spouse if MFJ) must have earned income from wages, salaries, tips, other taxable employee compensation, or net earnings from self-employment.
1. Payments for care can not be made to a spouse or dependent.
2. You are precluded from the credit if your filing status is Married/separate.
3. The qualifying person must have lived in the home with you for more than 6 months.
4. You may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
5. Qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that are excluded from income.
If an individual is paid to come to your home and care for your dependent or spouse, you pretty much by default become a household employer liable for employment tax reporting and payment obligations. Check out IRS Publication 926.
1. Business activity alone is not the only factor used in determining qualification for the Domestic Production Activity Deduction (DPAD). The actual deduction reported on IRS Form 8903 (Line 22) is the lesser of 9% of the qualified production activities income (QPAI) or 50% of W-2 wages. So basically in order to qualify you must have W-2 wages.
2. Under [Reg § 1.199-3(m)(2)(iii)] improvements to land and capitalized to land such as landscaping are considered construction activities only if they are performed in connection with other activities associated with the erection or substantial renovation of real property. Landscaping alone in and of itself does not usually rise to the threshold criteria for consideration of construction related expense.
According to Cary A. Nievinski v. Commissioner TC Summary Opinion 2011-10 even though IRS Form 5405 and IRS Publication 4819 provide only general instructions and do not address all the rules and limitations applicable to the first-time home buyer credit, the apparent failure of some IRS publications to explain the “no-purchase-from-family” limitation of the first-time home buyer credit has no effect on the authority of §36(c). Failure to understand this does not provide a legal basis to allow you to claim the first time home buyer tax credit.
The First Time Home Buyer Credit (FTHBC) Account Look-up tool is now up and running on the IRS website. This tool provides information that helps taxpayers accurately report their FTHBC repayment obligations on their federal tax return. To access this tool, go to:
Taxpayers need to enter their Social Security Number, date of birth, and complete address. Taxpayers will be able to check on the original amount of the credit, annual repayment amount, total amount paid (with the most recent account update) and the total balance left to be paid.
A qualifying child for the child tax credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.
1. Age test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.
2. Relationship test To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
3. Support test In order to claim a child for this credit, the child must not have provided more than half of his/her own support.
4. Dependent test You must claim the child as a dependent on your federal tax return.
5. Joint return test The qualifying child can not file a joint return for the year (or files it only as a claim for refund).
6. Citizenship test To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.
7. Residence test The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.