lesson 9 miscellaneous credits. objectives determine eligibility for the credit for the elderly or...
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Lesson 9 Miscellaneous Credits
Objectives
• Determine eligibility for the Credit for the Elderly or the Disabled
• Calculate the Credit for the Elderly or the Disabled• Calculate the Credit for Qualified Retirement Savings
Contributions - Form 8880• Calculate the Residential Energy Credits for nonbusiness
energy property and residential energy efficient property using Form 5695.
• Calculate the Qualified Electric Vehicle Credit using Form 8834.• Calculate the Alternative Motor Vehicle Credit using Form 8910. • Accurately report the Foreign Tax Credit if Form 1116 is not
required• Be aware of the Mortgage Interest Credit
Intake/Interview Process
Form 13614 – Intake and Interview Sheet - Credits Section
Credit - Elderly/DisabledQualifications
• U.S. Citizen or resident• At least age 65 or retired on
permanent and total disability• AGI is less than:
• Single, Head of Household, or Qualifying Widow(er) $17,500
• MFJ (both spouses qualified) $25,000• MFJ (one spouse qualified) $20,000• MFS (didn’t live together) $12,500
Credit – Elderly/DisabledComputation
• Nontaxable Social Security or nontaxable pension(s) must be less than:• Single, Head of Household, or Qualifying
Widow(er) $5,000• MFJ (both spouses qualify) $7,500• MFJ (one spouse qualifies) $5,000• MFS (didn’t live together) $3,750
• Use Schedule 3 if filing Form 1040A, use Schedule R if filing Form 1040
• Substantial Gainful Activity
Credit for Qualified Retirement Savings
Contributions• Contributions to a retirement plan or
IRA may be eligible for a tax credit• Non-refundable credit• Maximum credit is $1,000• Limitations based on:
• Filing status• Adjusted Gross Income• Qualified contributions
Credit for Qualified Retirement Savings Contributions
• Form 8880 is used to calculate the credit
• Chart for the applicable percentage is part of the form
• If the taxpayer has received any distributions from a retirement plan, you may need to complete line 4 on the Form 8880
Residential Energy Credits
• Nonbusiness Energy Property Credit
• Residential Energy Efficient Property Credit
• Form 5695
Qualified Electric Vehicle Credit
• Qualified Electric Vehicle• Form 8834
Alternative Motor Vehicle Credit
• Requirements - Alternative Motor Vehicle
• Form 8910
Foreign Tax Credit
• Created to avoid double taxation• If the Taxpayer paid income, war
profits, excess profit taxes to any:• Foreign country, U.S. possession,
political subdivision or agency of the country or possession.
• May need to consult paid tax preparer to determine if the tax paid is eligible for the foreign tax credit.
Foreign Tax Credit
• If all of the following requirements are met, Form 1116 is not required:• Foreign-source income is from interest
and dividends only• The total of the foreign taxes does not
exceed $300 ($600 for MFJ)• All of the foreign taxes were legally
owed and paid to countries recognized by the U.S. as eligible for the credit
Mortgage InterestCredit
• Hold a qualified Mortgage Interest Credit Certificate on main home
• Must reduce mortgage interest deduction on Schedule A (if itemizing)
• Use Form 8396 to figure credit on mortgage interest paid
• May carry forward unused credit for up to three years
Quality Review (QR)
Form 8158 – Quality Review Checklist
Adjustments, Deductions and Credits Section
Lesson Summary
• Credit for the Elderly or the Disabled• Credit for Qualified Retirement Savings
Contributions• Residential Energy Credits• Qualified Electric Vehicle Credit• Alternative Motor Vehicle Credit• Foreign Tax Credit • Mortgage Interest Credit
Lesson 9 International Segment
Foreign Tax Credit
Objectives
• Determine which taxes are eligible for the Foreign Tax Credit
• Apply the criteria for claiming the Foreign Tax Credit
• Accurately compute the foreign tax credit using Form 1116 or tax preparation software
• Assist taxpayer in compiling the documents necessary for a paid tax preparer to complete the return
Intake/Interview Process
Form 13614 – Intake and Interview Sheet - Credits Section
What Taxes Qualify
• Foreign Source Income – Taxed by Foreign Country
• The following are the basic requirements: - Tax imposed must be similar to income tax
imposed in the US - Taxpayer must not receive any kind of specific
economic benefit from the payment of the tax - Tax must be imposed by “eligible foreign
country”
Types of Income
• Passive Income• High Withholding Tax Interest• General Limitation Income
Form 1116
• Part I – Used to report the taxable income or loss from sources outside the United States
• Part II – Used to report foreign taxes paid or accrued
• Part III – Used to compute the amount of the Foreign Tax Credit
Quality Review (QR)
Form 8158 – Quality Review Checklist
Adjustments, Deductions and Credits Section
International Summary
• To be eligible for the Foreign Tax Credit, foreign taxes must be:
- Based on foreign sourced income - Similar to US income tax - Free of any specific economic benefit - Paid to an “eligible foreign country”
• The Foreign Tax Credit is computed using Form 1116
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