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Miscellaneous Credits

Miscellaneous Credits. All types of credits discussed in this lesson are nonrefundable credits. A nonrefundable credit can only reduce the tax liability to zero. Major Miscellaneous Credits. Retirement Savings Contributions Credit Credit for the Elderly or the Disabled

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Miscellaneous Credits

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  1. Miscellaneous Credits • All types of credits discussed in this lesson are nonrefundable credits. • A nonrefundable credit can only reduce the tax liability to zero.

  2. Major Miscellaneous Credits • Retirement Savings Contributions Credit • Credit for the Elderly or the Disabled • Residential Energy Credits • Mortgage Interest Credit

  3. No AGI limit for Retirement Savings Contributions Credit • True • False

  4. Answer BModified AGI Limit Retirement Savings Contributions Credit • $56,500 for Married Filing Jointly • $42,375 for Head of Household • $28,250 for Single, Married Filing Separately, or Qualifying Widow(er)

  5. Plans to Qualify Retirement Savings Contributions Credit • 401(k) plan—including a SIMPLE 401(k) and the federal Thrift Savings Plan • 403(b) annuity • Governmental 457 plan • SIMPLE IRA plan • Salary reduction SEP • 501(c)(18)(D) plan Voluntary after-tax employee contributions to tax-qualified retirement plan or section 403(b) annuity plan. Contributions made as a condition of employment are not considered to be voluntary.

  6. Factors that Reduce the Eligible Contribution The testing period includes: • The tax year • The two preceding tax years, and • The period between the end of the tax year and the due date of the return, including extensions The types of distributions that reduce the eligible contributions include any distribution: • That is included in the taxpayer's gross income from a qualified retirement plan or from an eligible deferred compensation plan • From a Roth IRA that is not a qualified rollover contribution

  7. Determining the Amount of the Credit • Calculate the retirement savings contributions credit on Form 8880, Credit for Qualified Retirement Savings Contributions, and report the amount in Form 1040, Tax and Credits section. • The credit can be as low as 10% or as high as 50% of a maximum annual contribution of $2,000 per person depending on filing status and AGI.

  8. Credit for the Elderly or the Disabled To qualify for the credit for the elderly or the disabled, individuals must be: • Age 65 or older at the end of 2011 or • Under age 65, retired on permanent and total disability, receiving taxable disability income, and have not reached the mandatory retirement age their company has set

  9. Income Limits Credit for the Elderly or the Disabled

  10. Nonbusiness Energy Property Credit The nonbusiness energy property credit is available for certain qualifying energy efficiency improvements or residential energy property costs. The qualifying items are: • Biomass stoves • Heating, ventilating, air-conditioning (HVAC) • Insulation • Roofs (metal and asphalt) • Water heaters (non-solar) • Windows and doors The credit is only available for existing homes that are the taxpayer's principal residence—new construction and rentals do not qualify

  11. Which of the following item is out of scope of VITA • Retirement Savings Contribution Credit • Child tax credit • Mortgage Interest Credit • None

  12. Answer CMortgage Interest Credit • Taxpayers who hold qualified mortgage credit certificates (MCCs) under a qualified state or local government program may claim a nonrefundable credit for mortgage interest paid. • This topic is out of scope for the VITA/TCE program and is included for your awareness only. • Taxpayers who wish to claim this credit should seek the assistance of a professional tax preparer.

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