Chapter 13N - Chapter 13 Non Business Tax Credits(Pages...

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Chapter 13 Non Business Tax Credits (Pages 13-46 through 13-66)
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Non-Business Credits There are several non-business credits available to individual taxpayers only These credits include (1) the child tax credit, (2) the child and dependent care credit, (3) the HOPE and Lifetime learning credits, (4) the credit for adoption expenses, (5) the credit for the elderly, (6) the credit for interest on certain home mortgages, and
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Non-Business Credits (cont’d) Child Tax Credit A special tax credit for taxpayers with children allows most taxpayers to claim a credit of $1,000 for each qualifying child (page 13-46) The benefits of the credit are not extended to wealthy individuals The credit is reduced by $50 for each $1,000 (or part thereof) of Modified AGI over $110,000 married filing jointly and $75,000 for other taxpayers. In addition the Act provides that at least a portion of the child tax credit will In addition the Act provides that at least a portion of the child tax credit will be refundable for all taxpayers with qualifying children (see chapter 4)
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Non-Business Credits (cont’d) Child and Dependent Care Credit Taxpayers are able to claim a credit for a portion of their child and dependent care expenses if they meet two requirements: (1) the taxpayer maintains a household for a qualifying individual and (2) the expenses – so called employment- related expenses – are incurred to enable the taxpayer to be gainfully employed. A taxpayer can claim the credit only if he or she maintains a household for one of the following individuals: A dependent under the age of 13 (e.g., taxpayer’s child) If the individual becomes 13 during the year, he or she normally qualifies only for the part of the year he or she was under 13 An incapacitated dependent An incapacitated spouse
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Non-Business Credits (cont’d) Child and Dependent Care Credit (continued) Volunteer work for a nominal salary does not constitute gainful employment Expenses incurred when one spouse works and the other attends school on a full-time basis are eligible The expenses must be for the care of the qualifying individual (e.g., the cost of a baby- sitter) The costs of transportation to a place for care do not qualify unless the qualifying individual is incapacitated Expenses incurred for a child in the first grade level on do not qualify
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Non-Business Credits (cont’d) Child and Dependent Care Credit (continued) The applicable percentage begins at 35% but is reduced (but not below 20%) by 1% for each $2,000 (or fraction thereof) that the taxpayer’s adjusted gross income exceeds $15,000 Taxpayers with AGI exceeding $43,000 have a rate of 20% The Code imposes limitations on the amount of eligible expenses: The first limitation simply sets a maximum dollar amount: $3,000 for one qualifying individual and $6,000 for two or more individuals.
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Non-Business Credits (cont’d) Child and Dependent Care Credit (continued)
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Chapter 13N - Chapter 13 Non Business Tax Credits(Pages...

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