CARL WATTS & ASSOCIATES
March 14, 2011
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Washington DC
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tel/fax 202 350-9002 |
Federal Tax Credits
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Family Tax Credits
Child Tax Credit is a nonrefundable credit limited to $1,000 per child. To qualify for this credit, the child must be a U.S. citizen or resident, under the age
of 17, who provided less than half of his or her own support during the year, and lived with you for more than half of the current tax year.
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The amount of the credit is reduced over the MAGI (modified adjusted gross income) limits of $75,000 for head of household and $110,000 for married filing jointly.
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Dependent Care Tax Credit is a nonrefundable credit meant to help you defray the costs of paying for childcare or other dependent care.
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The qualifying person for this credit is either a child who is your dependent age 12 or younger when the care is provided, or your spouse or dependent over the age of 12, if physically or mentally incapable of caring for themselves, and who lived with you for more than half of the year.
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The credit can be worth from 20% up to 35% of some or all of the expenses you paid to the care provider, depending on your income level.
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Adoption Tax Credit is a refundable credit intended to reimburse many of the various expenses incurred while adopting a qualifying child. Expenses previously reimburses (by your employer for instance) may not be included for the credit, but there are some qualified expenses paid by your employer that can be excluded from the taxable income.
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| A qualifying child is a child under the age of 18 or a child that lacks the ability to care for him or herself. |
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For 2010, the maximum amount of the credit was increased to $13,170, depending on the income level (which must not exceed an AGI of $222,520).
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Elderly and Disability Tax Credit is a nonrefundable credit of up to $1,125 for people over 65 years of age, or those who retired on total and permanent disability income.
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There are taxable income limits and nontaxable income limits for the credit, depending on the filing status. For instance, a single over 65 with an AGI of over $17,000 and nontaxable SS and other nontaxable pensions of over $5,000 is not eligible for this credit.
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Alternative Motor Vehicle Credit is a nonrefundable credit for four types of vehicles: qualified hybrid vehicle (8,500 pounds or less), advanced lean burn technology vehicle, qualified alternative fuel vehicle, and qualified fuel cell vehicle.
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Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies.
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Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification of the maximum credit allowable. However, the credit for converting a vehicle to a qualified plug-in electric drive vehicle is the smaller of $4,000, or 10% of the cost of the conversion.
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If you purchased a qualified hybrid vehicle weighing 8,500 pounds or less or an advanced lean burn technology vehicle from a manufacturer who previously sold at least 60,000 of these vehicles, the amount of your credit may be reduced. Your manufacturer should give you the information you need to figure your reduced credit.
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Are you interested to find out what other tax credits are there that you may qualify for? Well, we thought you’d be interested, so here is a list of tax credits, grouped into several categories.
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Work and Job Related Tax Credits |
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You can find details about the Saver’s Credit in one of our previous newsletters.
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Foreign Tax Credit is a nonrefundable credit designed to reduce a double tax burden for those earning income outside of the United States.
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You can choose to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. You may be able to use taxes paid or accrued as a carryover tax credit if they exceed the credit amount in a single year. The amount and time limit of the carryover or carry back depend on the year that you are filing.
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You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion.
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Earned Income Tax Credit is a refundable credit for taxpayers who earn low to moderate incomes.
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To qualify for this credit you need to be between the ages of 25 and 65 and earn income through work within the limits specified by the IRS, which differ depending on your marital status and number of children.
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Among other requirements, you, your spouse, and any qualifying children must have valid SS numbers, and you and your spouse have to file jointly.
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For 2010 the maximum Earned Income Tax Credit per taxpayer goes from $457 with no qualifying children to $5,666 with three or more qualifying children.
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| Retirement Savings Contributions Credit (Saver’s Credit) is a nonrefundable tax credit intended to encourage taxpayers with low and modest income to save for retirement. |
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Home Energy Tax Credits are nonrefundable credits that we talked about in one of our earlier newsletters, but the money savings have been greatly expanded with ARRA in 2009.
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For the Nonbusiness Energy Property Credit there is a $1,500 credit cap over the years 2009 and 2010, that applies to all qualifying property, no matter what type of residence you own, as long as it’s your primary residence in the U.S.
You can take advantage of this credit even if you claimed energy credits in past years.
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There is a new renewable energy tax credit of 30% for solar electrical systems, solar water heating systems, geothermal heat pumps, fuel cells, and wind turbines. Unlike the energy saving improvements credit, this credit is not restricted to your primary residence (except for the fuel cell credit).
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Home Related Tax Credits
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To qualify for the home energy tax credit, improvements must be placed into service after December 31, 2008, and before January 1, 2011.
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First Time Homebuyer Tax Credit is a refundable credit which was set to expire in 2010.
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The deadline to close on the purchase of a home and still qualify for the First-Time Homebuyer Tax Credit was September 30, 2010. But before you closed the sale, you must have entered into a binding contract before May 1, 2010. If you met both of these deadlines, you may be able to claim the credit on your 2010 Tax Return. For further details please read the newsletter we dedicated to this subject.
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Education Tax Credits
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You can read all about the American Opportunity Tax Credit with one click here, as we touched this subject not too long ago.
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Lifetime Learning Tax Credit is a nonrefundable credit that applies to undergraduate, graduate, professional degree courses, and even post-graduate courses that help improve your job skills.
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This credit amounts to a maximum of $2,000 per household (20% of the first $10,000 paid for eligible education expenses for all eligible students) and is available for an unlimited number of years.
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The credit phases out between a MAGI of $50, 000 and $80,000 if single, and $100,000 and $120,000 if married filing jointly.
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You cannot apply for both The Lifetime Learning Credit and The American Opportunity Credit for the same student in the same year.
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