Uploaded by Freeman Morgan

ITF IPP Ch07 2019 IN LS

advertisement
CHAPTER 7
TAX CREDITS
Income Tax Fundamentals 2019
Gerald E. Whittenburg
Martha Altus-Buller
Steven Gill
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
1
LEARNING OBJECTIVES
 Calculate the child tax credit
 Determine earned income credit
 Compute child/dependent care credit
 Describe minimum essential coverage, individual
shared responsibility provisions and calculate
premium tax credit under Affordable Care Act
(ACA)
 Compute foreign tax credit
 Determine use and calculation of adoption credit
 Recognize basic individual credits for energy
efficiency
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
2
CREDITS AND DEDUCTIONS
A credit is a direct reduction in tax liability
◦ Credits are used to target certain groups for
tax benefit
◦ Provide equal benefit to all taxpayers
A deduction is a reduction of taxable
income
◦ Reduces tax liability in the amount of benefit
Deduction x tax rate = tax benefit
◦ Provides more benefit to higher income
taxpayers
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
3
CHILD TAX CREDIT
Credit to taxpayers with qualifying children
 Up to $2,000 credit for each child under age 17 claimed as
a dependent who is “qualifying child”*
 Two parts – non-refundable and refundable
 Nonrefundable credit is claimed on Line 12 of Form 1040; Line 12
includes qualifying dependent credit of $500
 Refundable credit is claimed on Form 8812
TCJA made three significant changes to child tax credit
1. Increased the credit per child to $2,000
2. Increased the threshold for when phase-outs start
3. Increased the refundable amount of credit for certain
taxpayers
*Note: additionally, TCJA added a new qualifying dependent credit of
$500 for certain dependents*
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
4
CHILD TAX CREDIT - CONTINUED
 Credit is $2,000 per child; however, phases out when:
 AGI > $400,000 (MFJ)
 AGI > $200,000 (all others)
 Credit phased out $50 for each $1,000 (or part thereof) that
AGI exceeds threshold
 $500 “other dependent credit” for each qualifying dependent
other than qualifying children. For example – dependent
parent or dependent child older than 17
 Portion that is nonrefundable is limited to amount of tax
liability prior to child tax credit
 For example: Dante and Sharon have a tax liability of $2,300 before any
credits. They are eligible for an education credit of $600 and a child tax
credit of $2,000. Their AGI = $30,000.
The two nonrefundable credits = $2,600 > tax liability = $2,300
Nonrefundable child tax credit limited to $2,300 - $600 = $1,700,
and a $300 refundable child tax credit is created for balance
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
5
CHILD TAX CREDIT – CONTINUED #2
 Form 8812 used for refundable portion called “additional
child tax credit”
• Refundable amount = $1,400/qualifying child, but limited as
follows:
•
If <+2 qualifying children, additional credit is lesser of unused
child tax credit due to tax liability or 15% of earned income over
$2,500. From prior slide – the $300 refundable credit is limited
to 15% of earned income less $2,500, but not more than $1,400.
($30,000 - $2,500) x 15% = $4,125, so entire $300 is a
refundable credit.
•
If 3+ qualifying children, can only be used to offset FICA taxes
(note: cannot be used to refund FICA). Credit limited to greater
of 15% of earned income over $2,500 or amount of FICA paid up
to unclaimed child tax credit
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
6
CHILD TAX CREDIT EXAMPLE
Example
Kendra and Nguyen are taxpayers with
children ages 25, 10, and 3 and they all have
valid social security numbers. Their AGI is
$432,200 and they file jointly. What is their
child tax credit, assuming all of their children
are ‘qualifying children?’
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
7
SOLUTION
Example
Kendra and Nguyen are taxpayers with children ages 25, 10,
and 3, and they all have valid social security numbers. Their
AGI is $432,200 and they file jointly. What is their child tax
credit, assuming all of their children are ‘qualifying children?’
(Clearly their tax liability greatly exceeds the amount of the
nonrefundable credit).
Solution
AGI exceeds threshold, therefore must figure phase-out
($432,200 - $400,000) / $1,000 = 32.2
Round 32.2 up to 33
(33 x $50) = $1,650 reduction
Child tax credit = ($2,000 X 2) + $500 - $1,650 =
$2,850
Note: The two youngest qualify for the child credit, and the
oldest child for the ‘other dependent’ credit
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
8
CHILD TAX CREDIT - ASSORTED ISSUES
Each child claimed must have TIN# by due date of return
•
Qualifying dependent need not have SS# if credit is
nonrefundable
If taxpayer erroneously claims child tax credit (due to
reckless/intentional disregard), then loses ability to
claims for two tax years
•
Extended to 10 years if fraudulent
Preparers must complete Form 8867 (due diligence
checklist)
Refunds due to child tax credit will not be issued before
February 15 of subsequent year to give IRS time to
review required information
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
9
EARNED INCOME CREDIT (EIC)
Refundable credit
◦ Serves as “negative” income tax
◦ Intended to assist working poor by reducing tax burden
Taxpayers can get a refund even if they have no tax liability
Taxpayer(s) with children can receive EIC
◦ AGI limits (see page 7-8) – based on no qualifying kids, 1, 2, or 3+
◦ Not eligible if married filing separate
◦ All parties must have valid Social Security numbers
◦ Foreign income exclusion not allowed
◦ U.S. citizenship required for entire year
◦ Earned income must meet certain guidelines (see p 7-8)
◦ “Disqualified income” (certain types of investment income) must be
less than $3,500
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
10
EIC WITH NO QUALIFYING CHILD
Taxpayer may get EIC, even without a
qualifying child
◦ Have to meet all the qualifications of prior slide
plus
◦ Taxpayer must be between ages 25 and 65
◦ Taxpayer cannot be eligible to be claimed as
another taxpayer’s dependent or be a qualifying
child of another taxpayer
◦ Taxpayer must live in U.S. for more than one-half of
the tax year
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
11
EIC WITH A QUALIFYING CHILD
Taxpayer may get EIC with a qualifying child,
with two exceptions to Chapter 1 definition
• Child need not meet support test and
• Child must live in a U.S. home for more than ½ year
Also, qualifying child cannot be claimed by more than
one person and taxpayer cannot be a qualifying child of
another taxpayer
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
12
EARNED INCOME CREDIT (EIC) - CONTINUED
 Each child claimed must have TIN# by due date of return
 If taxpayer erroneously claims earned income credit (due
to reckless/intentional disregard) – then loses ability to
claims for two tax years (longer if fraudulent)
 If IRS rejects EIC for any reason other than math/clerical
error, taxpayer must complete Form 8862 to claim EIC in
a future year
 Refunds due to earned income credit will not be issued
before February 15 of subsequent year to give IRS time to
review required information
 Preparer must complete Form 8867, a due diligence
checklist
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
13
TO CALCULATE EIC
Use EIC tables to calculate or ask IRS to figure for
you on Schedule EIC
◦ Appendix B provides EIC
◦ Compare to results on Worksheet A (on p. 7-15) and take
smaller of the two calculations
◦ Shows up on line 66a in payments section
◦ For taxpayers with qualifying child, Schedule EIC required
EIC is reported on page 2 of 1040
◦ Question: What is different about how this credit is
reported on the 1040 compared to other credits?
◦ Answer: It acts like a payment of tax and therefore
taxpayer can receive refund, even if no tax is due
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
14
CHILD & DEPENDENT CARE CREDIT
Gives tax relief to working parents who must
provide childcare for dependents
◦ Dependent must be under age 13 or
◦ Spouse or dependent who cannot care for themselves
If child’s parents are divorced, child need not be
dependent of taxpayer claiming credit if he/she
lives more than 50% of year with that parent
Multiply qualifying care costs (see next slide) by
an applicable percentage, based on AGI
◦ From 35% down to 20%
◦ Credit percentages found on first page of Form 2441
(page 7-19) - “Child & Dependent Care Expenses”
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
15
CHILD & DEPENDENT CARE CREDIT CONTINUED
Determine qualifying expenses
In-home and out-of-home care
• Day camps qualify, but not overnight camps
•
•
Camp must be focused on fun/games, not education
Limited to the lesser of
Earned income of lowest earning spouse*
or
• $3,000 (1 dependent) or $6,000 (2+ dependents),
reduced by any amounts reimbursed by employer
•
Must include taxpayer ID # of caregiver
*If spouse is full time student, count him/her as earning
$250/month (1 dependent) or $500/month (2+ dependents)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
16
CHILD & DEPENDENT CARE CREDIT EXAMPLE
Example
Joanne has salary of $58,400 and investment
income of $2,100. Lou, her spouse, is a full-time
student for 12 months/year. They have three
children under 13 and total daycare costs of
$12,800.
What is their Child and Dependent Care
Credit?
How would this change if Lou is not a
student and works part-time, earning
$3,000, and Joanne received $2,200 of
employer-provided dependent care
assistance?
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
17
SOLUTION
Solution
Qualifying costs are lesser of:
Her earned income $58,400 or his earned income $6,000
(imputed at $500 per month)
or
annual daycare bill of $12,800, but can only use $6,000
Multiply by % from table on Form 2441 (based on AGI)
$6,000 x 20% = $1,200 credit
If Lou works and Joanne receives assistance, qualifying costs are
lesser of:
Her earned income $58,400 or his earned income $3,000
or
annual net daycare bill $12,800 - $2,200 = $10,600
Multiply by % from table on Form 2441 (based on new AGI)
$3,000 x 20% = $600 credit
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
18
AFFORDABLE CARE ACT (ACA)
Also called Obamacare
•
3.8% net investment income tax and .9% Medicare
surtax impact high income taxpayers
Certain taxpayers exempt
•
•
•
Can be for things like general hardship, religious
opposition, unaffordability based on projected
household income, etc. (table on p. 7-21)
Report on Form 8965 (p. 7-23)
Taxpayer issued an ECN “Exemption Certificate #”
Some provisions of ACA beyond scope of textbook (for example,
the employer’s shared responsibility provision)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
19
INDIVIDUAL SHARED RESPONSIBILITY

Need to show minimum essential coverage (MEC) or pay
a ‘penalty tax’ for failure to meet these levels
This will not apply after 2018


MEC is level of health coverage that ensures essential
benefits are provided
Taxpayer can purchase from
•
Insurance company
•
Through his/her employer
•
From health insurance exchange
Note: all plans must meet MEC, but coverage options vary and
include bronze, silver, gold and platinum

Health insurance companies, self-insured employers,
insurance exchanges, etc. that provide MEC issue yearend forms to taxpayer (Form 1095-A, 1095-B or 1095-C)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
20
INDIVIDUAL SHARED RESPONSIBILITY CONTINUED

Individual shared responsibility is calculated as an
annual number, then divided by 1/12 for monthly use
o

Applied to each household member without coverage or
an exemption
MEC = greater of
(AGI taxpayer’s filing threshold) x 2.5%
or
$695/adult plus $347.50/child
(family maximum of $2085)
Capped by national average annual bronze premium on federal
exchange; for 2018 = $3,396 per person
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
21
PREMIUM TAX CREDIT PROVISIONS

Eligible taxpayers (requirements on pages 7-26 – 7-27)
may receive tax credit to lower the cost of health care
o
o
o
Income eligibility is 400% of poverty level
Taxpayers below poverty level are eligible for
Medicaid and not the credit
Use specific tables to compute allowable credit;
lesser of
o
o
Actual health care premiums paid
or
Silver plan premiums less the taxpayer’s expected
contribution healthcare premiums
See pages 7-29 – 7-31 for
Form 8962 Premium Tax Credit (PTC)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART. 22
EDUCATION TAX CREDITS
Tax law contains number of provisions intended to reduce
cost of higher education – threaded throughout book
Benefit
Learning
Objective
Exclusion from gross income for scholarships
2.12
Employer-provided education assistance plans
2.5
Tuition reduction for school employees
2.5
Deduction of educational expenses
3.6
Student loan interest deduction
5.8
Qualified tuition programs
2.14
Coverdell ESAs
2.14
Tuition deduction (currently expired)
2.14
American Opportunity tax credit
7.5
Lifetime Learning credit
7.5
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART. 23
AMERICAN OPPORTUNITY CREDIT (AOTC)
 Provides tax relief for qualified higher ed expenses – p. 7-34
 Calculated on Form 8863 (pp. 7-35 – 7-36)
 Available for each eligible student (taxpayer, spouse or
dependent) in first 4 years of college. To be eligible, student
◦
◦
◦
◦
Pursue a degree/recognized credential
Attend at least 1/2 time for one term during tax year
Have no prior felony drug conviction
Receive Form 1098-T from higher education institution
 Credit = 100% of first $2,000 + (25% of the next $2,000)
◦ Maximum credit = $2,500
◦ Phased out when AGI > certain levels (page 7-37)
◦ 40% of it is refundable
Preparer must complete Form 8867 (due diligence)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
24
LIFETIME LEARNING CREDIT (LLC)
 Provides tax relief for education expenses - encourages
taxpayers to take courses to acquire or improve job skills
◦ Tuition and fees only (not books)
◦ Can be used for less than ½ time attendance
◦ Credit is not subject to felony drug offense restrictions
 Calculated on Form 8863 -- Credit = 20% of first $10,000
◦ Maximum credit = $2,000 per year
◦ Lower AGI phase-outs than American Opportunity Credit
◦ May take credit in relation to undergraduate, graduate or
professional courses
◦ No limit on number of years you may claim LLC
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
25
LIMITATIONS
For each student, taxpayer can get only one of
the credits
 May take LLC for one student and AOTC for
another student
 Only the person claiming the dependency
exemption can claim a credit
 Cannot claim for sports, games and hobbies,
unless the course is part of a degree program
 Must reduce expenses by tax-free scholarships or
employer reimbursements

©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
26
EDUCATION CREDITS EXAMPLE
Example
Dave and Val (MFJ) have 2 dependent children and
have AGI of $72,000. Sean is taking 4 credits (parttime enrollment) at City College of Newark. His
tuition and fees are $4,200. Corey is a freshman at
Tulane. Her tuition and fees are $39,200. Neither
child has a felony drug conviction. What amounts
may Dave and Val claim as education credits?
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
27
SOLUTION
Example
Dave and Val (MFJ) have 2 dependent children and have AGI of $72,000.
Sean is taking 4 credits (part time enrollment) at City College of
Newark. His tuition and fees are $4,200. Corey is a freshman at
Tulane. Her tuition and fees are $39,200. Neither child have felony
drug convictions. What amounts may Dave and Val claim as education
credits, assuming no scholarships?
Solution
Val and Dave may take $3,340 in total education credits. Their AGI is
below the phase-out limits for both credits, so they get the full
amount.
Sean may not take the AOTC because he is not enrolled half time.
Therefore (20%)($4,200) = $840 lifetime learning credit
Corey, as a freshman, qualifies for the AOTC
(100%)($2,000) + (25%)($2,000) = $2,500 AOTC
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
28
FOREIGN TAX CREDIT
U.S. taxpayers are allowed foreign tax credit on
income earned in foreign country and subject to
income taxes in that country
◦ Mostly seen on dividends on foreign stock investments
◦ Reported on Form 1116 (or if attributable to small amounts
of withholding ($300/$600 S/M) then don’t need Form 1116
◦ Can be carried back 1 year and forward 10 years
Provides relief from double taxation on money
generated from foreign sources
◦ Maximum credit is amount paid to foreign governments
◦ But limited to:
Net foreign income
U.S. taxable income
x U.S. tax liability
before credit
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
29
FOREIGN TAX CREDIT EXAMPLE
Example
Joe Steele had $200,000 income from U.S. and
$100,000 income from employment in Lithuania.
He paid $40,000 in Lithuanian taxes. Assume his
U.S. tax liability is $85,069; what is Joe’s foreign
tax credit for the current year?
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
30
SOLUTION
Example
Joe Steele had $200,000 income from U.S. and $100,000
income from employment in Lithuania. He paid $40,000 in
Lithuanian taxes. Assume his U.S. tax liability is $85,069;
what is Joe’s foreign tax credit for the current year?
Solution
Maximum Foreign Tax Credit is the $40,000 paid; limited to:
($100,000/$300,000) x $85,069 = $28,356 credit
Carry back (one year) or forward (ten years) the unused
portion:
($40,000 - $28,356) = $11,644
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
31
ADOPTION CREDIT
IRS provides a credit as relief to taxpayers who pay
adoption expenses and are married filing jointly
Credit is amount spent up to $13,810 per adoption
o
Adoption credit begins to phase out when AGI > $207,140
o
Different rules if pay expenses over more than one year or if
foreign adoption or special needs child
Qualified adoption expenses include court costs, legal
fees, travel, etc.
Unused credits can be carried over for up to 5 years
Calculated on Form 8839
Special rules for domestic and foreign multiyear adoptions
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
32
EMPLOYER-PROVIDED
ADOPTION ASSISTANCE
 If an employer pays qualified adoption expenses on
behalf of a taxpayer
o
o
Employee may exclude amounts paid by employer
Must occur under adoption assistance program
 Taxpayer may claim adoption credit and adoption
exclusion for same adoption
o
But cannot claim both credit and exclusion for the same
expenses
 The total amount excludable per child is limited to
$13,810 (subject to phase out)
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
33
OVERVIEW OF MAJOR ENERGY CREDITS
Energy credits are expiring, with only two
remaining currently active
Credit
IRC Section
Status
Electric vehicle
30D
Active
Nonbusiness energy
property
25C
Expired 2017
Residential energy
efficient property (REEP)
25D
Active
Qualified fuel cell motor
vehicle
30B
Expired 2017
Qualified alternative fuel
vehicle refueling property
30C
Expired 2017
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
34
PLUG-IN ELECTRIC VEHICLES CREDIT
Credit for purchase of hybrid gas-electric
vehicles
° Amounts vary, based on combination of weight and
kilowatt hour of traction battery capacity (between $2,500 $7,500)
° Credit phases out for each car manufacturer when they hit
200,000 cars sold
° Allowed for Chevy Volt, Nissan Leaf, Honda Clarityand
numerous other electric vehicles
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
35
RESIDENTIAL ENERGY-EFFICIENCY
PROPERTY (REEP) CREDIT
Credit for alternative energy expenditures
installed at taxpayer’s primary or secondary
residence
◦ 30% credit for qualified installation of solar, wind or
ground source geothermal heat pumps
◦ Reduced to 26% for property placed in service starting in 2020,
further reduced to 22% in 2021
◦ Can’t get credit for heating swimming pool or hot tub
Intent is to aid solar/wind industries, while
encouraging use of renewables
Reported on Form 5695
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
36
My head hurts!
THE END!
©2019 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED, COPIED, OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN WHOLE OR IN PART.
37
Download