tax credits (1)

8/7/2019 Tax Credits (1)

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By:

Ashton Khanchandani


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What is a Tax Credit?y Tax Credits are a direct reduction from a taxpayers tax

liability.

y May be granted for various types of taxes, Such as:y Taxes already paid

y To encourage investment & other behaviors

y

Subsidy Form of financial assistance paid to a business oreconomic sector.


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Tax Credit V. Deductiony Tax deductions reduce how much you owe in taxes by

decreasing your income. This can put you down into a

lower tax bracket, and that means that you will oweless in terms of taxes.

y Difference from Tax Credits:

y Figured after you determine your tax brackety Actual dollar for dollar reduction in the tax you owe


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Types of Tax Creditsy Education Credit:

y The American Opportunity Credit: Allows 100% of $2,000.00

and then 25% of next $2,000.00, up to $2,500.00y Lifetime Learning credit: 20% of $10,000.00

y Credits available To: Taxpayer, Taxpayers spouse anddependents

y Child Tax Credit:y $1000.00 credit is available for each qualifying child under 17

y Phased out at $50 to every $1,000 of AGI in excess of $110,000

Ex: 2 children AGI 124,000; Need to reduce the 2000 700

(124,000-110,000)/1000x50 = $1,300


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Types of Tax Credits Conty If neccesary


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True/False: Review Question?y Shane is a 17 year old US citizen who lives with his

mother and is supported by her. Shane qualifies for the

child tax credit.

y A. True

y B. False


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True/False: Review Question?y Shane is a 17 year old US citizen who lives with his

mother and is supported by her. Shane qualifies for the

child tax credit.

y A. True

y B. False (Correct.)


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Credits to encourage energy

efficiencyy There are various energy taxes available:

y Home energy efficiency. People who purchase andinstall certain products

y Energy efficient windows

y Insulation

y

Doors, roofs and heating/cooling equipmenty Allowing up to 30% or $1,500 tax credit for improvements

y Placed in service, January 1, 2009.


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efficiency conty Residential renewable tax:

y People who install solar energy systemsy Including solar water systems on your pool or house

y Installing small wind systems

y This will allow 30% tax credit to everyone involved

y

In order to be eligible for this tax credit all installments needto be in place by December 31, 2016


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efficiency conty Automobile Tax Credits:y Hybrid and Alternative fuel vehicles:

y Business/Person who buys or leases a hybrid gas-electric car is

eligible for an income tax credity Need to have vehicle before December 31, 2010

y Energy Stary A joint program with US department ofEnergy and U.S.Environmental Protection Agency

y Helps Businesses and families save money and protect the

environment through efficient practices and productsy At home they are allowing us to save up to 1/3 on our energy billy Companies are able to save up to twice the amount of savings


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Multiple Choice: Review Question?y You can get aTax Credit for?

y A. Installing a solar panel system to power your pool andhot tub

y B. Installing a solar panel to power your home.

y C. Installing a solar water heater

y D. All of the Above


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Multiple Choice: Review Question?y You can get aTax Credit for?

y A. Installing a solar panel system to power your pool andhot tub

y B. Installing a solar panel to power your home.

y C. Installing a solar water heater

y D. All of the Above (Correct)

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