Chapter 14 - Chapter 14...

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Chapter 14 Business Tax Credits and Corporate Alternative Minimum Tax Tax Credit VS. Tax Deduction Tax benefit received from a tax deduction depends on the marginal tax rate of the taxpayer o Tax benefit received from a tax credit is not affected by the taxpayer’s marginal tax rate Example: $1,000 expenditure: tax benefit of 25% credit compared to tax deduction at various marginal tax rates MTR 0% 15% 35% Tax benefit if a 25% credit is allowed $250 $250 $250 Tax benefit if tax deduction is allowed –0– $150 $350 General Business Credit Comprised of a number of business credits combined into one amount Limited to net income tax reduced by greater of: o Tentative minimum tax o 25% of net regular tax liability that exceeds $25,000 Unused credit is carried back 1 year, then forward 20 years Includes the following: o Tax credit for rehabilitation expenditures o Work opportunity tax credit o Research activities credit o Low-income housing credit o Disabled access credit o Credit for small employer pension plan startup costs o Credit for employer-provided child care Rehabilitation Expenditure Credit Credit is a percentage of expenditures made to substantially rehabilitate industrial and commercial buildings and certified historic structures Credit rate o 20% for nonresidential and residential certified historic structures o 10% for other structures originally placed into service before 1936 To qualify for credit, building must be substantially rehabilitated meaning qualified rehab expenditures exceed the greater of: o The adjusted basis of the property before the rehab expenditures, or o $5,000 Qualified rehab expenditures do not include the cost of the building and related facilities or cost of enlarging existing building Basis in structure is reduced by the credit amount Subject to recapture if rehabilitated property held less than 5 years or ceases to be qualifying property Work Opportunity Tax Credit Applies to first 12 months of wages paid to individuals falling within target groups o Credit limited to a percentage of first $6,000 wages paid per eligible employee
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40% if employee has completed at least 400 hours of service to employer 25% if at least 120 hours of service o Deduction for wages is reduced by credit amount Targeted individuals generally subject to high rates of unemployment, including o Qualified ex-felons, high-risk youths, food stamp recipients, veterans, summer youth employees, and long-term family assistance recipients Summer youth employees: Only first $3,000 of wages paid for work during 90-day period between May 1 and September 15 qualify for credit ARRTA of 2009 adds two additional targeted groups for 2009 and 2010 o Unemployed veterans Discharged or released from active duty in 2008, 2009, and 2010, and Recipients of unemployment benefits for at least 4 weeks during the year prior to being hired o
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This note was uploaded on 06/04/2010 for the course ACC 410 taught by Professor Su during the Spring '10 term at University of Nevada, Las Vegas.

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Chapter 14 - Chapter 14...

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