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In our previous newsletter we offered you an overview of the available tax credits for your family and dependents, education, and health care. Today you will be able to get a glimpse at the rest of the individual tax credits available to you for your 2017 income tax return.
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Income and Savings Tax Credits
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Retirement Savings Contributions Credit (Saver's Credit) is a credit to help low- and moderate-income workers, who have an adjusted gross income that does not exceed $30,000 ($45,000 if head of household; $60,000 if married filing jointly), save for retirement.
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- You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.
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| Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a: |
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Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.
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Head of House hold with income up to $45,000 in 2014 or $45,750 in 2015.
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Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.
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Foreign Tax Credit is a credit letting U.S. taxpayers avoid or reduce double taxation for income taxes paid to a foreign country or U.S. possession.
If you paid or accrued foreign taxes to a foreign country or U.S. possession and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes.
You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U.S. possession. Generally, only income, war profits and excess profits taxes qualify for the credit.
Taken as a deduction, foreign income taxes reduce your U.S. taxable income. You can deduct foreign taxes on Schedule A (Form 1040), Itemized Deductions.
Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.
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| If you choose to exclude either foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on income you can exclude. If you do take the credit, one or both of the choices may be considered revoked. |
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| Excess Social Security & RRTA Tax Withheld is a credit for taxpayers who: |
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Worked for two or more employers and had too much Social Security tax withheld from their pay; or
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Railroad employees who had excessive tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax withheld.
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This is a refundable tax credit, which means taxpayers may get money back even if they have no tax withheld.
Most employers must withhold social security tax from your wages. Certain government employers (some federal, state and local governments) don't have to withhold social security tax.
If you work for a railroad employer, your employer must withhold Tier 1 Railroad Retirement Tax Act (RRTA) tax and Tier 2 RRTA tax. Tier 1 RRTA provides social security and Medicare equivalent benefits, and Tier 2 RRTA provides a private pension benefit.
Credit for Tax on Undistributed Capital Gain
If a regulated investment company (commonly called a mutual fund) or real estate investment trust paid a tax on your capital gain distribution, you are allowed a credit for the tax. |
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Nonrefundable Credit for Prior Year Minimum Tax
The Alternative Minimum Tax (AMT) attempts to ensure that individuals and corporations that benefit from certain exclusions, deductions or credits pay at least a minimum amount of tax. If you are not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a minimum tax credit against your regular tax this year.
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Credit to Holders of Tax Credit Bonds
Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. You may be able to take a credit if you are a holder of clean renewable energy bonds (issued before 2010), new clean renewable energy bonds, qualified energy conservation bonds, qualified school construction bonds, qualified zone academy bonds or Build America Bonds. |
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Homeowners Tax Credits
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Mortgage Interest Credit helps lower-income individuals afford
home ownership. You must contact the appropriate government
agency about acquiring a Mortgage Credit Certificate before getting a mortgage or buying a home.
If you itemize your deductions, you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit you claim. |
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| Residential Energy Efficient Property Credit is a credit of 30 percent of the expenditures made by a taxpayer during the taxable year for: |
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Qualified solar electric systems;
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Qualified solar water heaters;
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Qualified fuel cell property;
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Qualified small wind energy property; and |
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Qualified geothermal heat pumps. |
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The credit for expenditures made for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property; the amounts of the other qualified expenditures eligible for the credit are not limited. In addition, this credit may be carried over if it exceeds the limitation imposed by section 26(a). The credit is available for property placed in service through Dec. 31, 2016.
The credit for solar electric property and solar water heating property is extended for property placed in service through December 31, 2021, at applicable percentages as described in the statute. |
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Nonbusiness Energy Property Credit is a credit of 10 percent of the cost of qualified energy-efficient improvements.
Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. The cost of installing these items is not included in the credit calculation. Additionally, a credit is available, including the costs of installation, for certain high-efficiency heating and air-conditioning systems, as well as high-efficiency water heaters and stoves that burn biomass fuel.
There is a lifetime limitation of $500, of which only $200 may be used for windows. Qualifying improvements must have been placed in service in the taxpayer's principal residence located in the United States through Dec. 31, 2016. |
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Low-Income Housing Credit is a credit for owners of residential low-income rental buildings satisfying specified conditions that can be taken over a 10-year credit period.
The state housing credit agency providing credits completes Part I of Form 8609 Low-Income Housing Credit Allocation and Certification, for each building and attaches a copy of each completed Form 8609 to the Form 8610, Annual Low-Income Housing Credit Agencies Report, which are then filed with the Low-Income Housing Credit unit at the Philadelphia campus. |
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The original of the Form 8609 is sent by the Agency to the building owner, who submits the original to the LIHC unit by the due date (including extensions) of the first tax return the owner files Form 8609-A, Annual Statement for Low-Income Housing Credit.
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| Each of this credits deserve a newsletter of their own, so stay with us and keep up with our weekly posts. |
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| As always, with our last line we recommend that you rely on professional advice to make sure you take advantage of all the tax credits you are entitled to. |
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