| I am under 65 and disabled, do I qualify for the credit for the elderly and disabled? | Top |
| If you are under age 65 at the end of the tax year, you can qualify for the credit only if you are retired on permanent and total disability. You are retired on permanent and total disability if: |
`You were permanently and totally disabled when you retired. You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. A physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. |
| You retired on disability before the close of the tax year. Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. |
| If you are under age 65, you can qualify for the credit only if you have taxable disability income. Disability income must meet both of the following requirements. It must be paid under your employer's accident or health plan or pension plan. |
| It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. |
| For additional information, see IRS Publication 524. |
| How do I claim the retirement contribution credit? | Top |
| You may be able to take this credit if you, or your spouse if filing jointly, made (a) contributions (other than rollover contributions) to a traditional or Roth IRA, (b) elective deferrals to a 401(k), 403(b), governmental 457, SEP, or SIMPLE plan, (c) voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the Federal Thrift Savings Plan), or (d) contributions to a 501(c)(18)(D) plan. |
| * The amount on Form 1040, line 37, or Form 1040A, line 22, is more than $25,000 ($37,500 if head of household; $50,000 if married filing jointly). |
However, you cannot take the credit if either of the following applies:
* The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1987, (b) is claimed as a dependent on someone else’s 2004 tax return, or (c) was a student. |
You were a student if during any 5 months of 2004 you:
* Were enrolled as a full-time student at a school or
* Took a full-time, on-farm training course given by a school
or a state, county, or local government agency.
A school includes technical, trade, and mechanical
schools. It does not include on-the-job training courses,
correspondence schools, or night schools. |
| What is the Electric Vehicle Credit? What is the rate? Is there a special form to file? | Top |
| The Electric Vehicle Credit is a credit for new qualified electric vehicles placed in service during the year. The rate is 7.5% of the cost, with a maximum credit of $3,000. This is a nonrefundable credit that should be reported using Form 8834. |
| What is the Health Coverage Tax Credit? What is the rate? Is there any special form to file? | Top |
| The Health Coverage Tax Credit is a credit for individuals eligible to receive a trade adjustment allowance (TAA) or who receive pension benefits from the Pension Benefit Guaranty Corporation (PBGC). The rate is 65% of qualified health insurance costs. This is a refundable credit that should be reported using Form 8885. |
| Can you explain the adoption credit? | Top |
| You may be able to take a tax credit of up to $10,390 for qualifying expenses paid to adopt an eligible child (including a child with special needs). The adoption credit is an amount subtracted from your tax liability. Although the credit generally is allowed for the year following the year in which the expenses are paid, a taxpayer who paid qualifying expenses in 2004 for an adoption which became final in 2004, may be eligible to claim the credit on the 2004 return. The adoption credit is not available for any reimbursed expense. In addition to the credit, up to $10,390 paid or reimbursed through the year 2004 by your employer for qualifying adoption expenses may be excludable from your gross income. |
| For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. An eligible child is a child with special needs if he or she is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. |
| The credit and exclusion for qualifying adoption expenses are each subject to a dollar limit and an income limit. |
| Under the dollar limit the amount of your adoption credit or exclusion is limited to $10,390 for each effort to adopt an eligible child. If you can take both a credit and an exclusion, this dollar amount applies separately to each. For example, if you paid $9,000 in qualifying adoption expenses for a final adoption, and your employer paid $4,000 of additional qualifying adoption expenses, you may be able to claim a credit of up to $9,000 and also exclude up to $4,000. |
| The $10,390 amount is the maximum amount of qualifying expenses taken into account over all taxable years. Therefore, it must be reduced by the amount of qualifying expenses taken into account in previous years for the same adoption effort, including an unsuccessful effort to adopt a different child. |
| The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (modified AGI). If your modified AGI is $155,860 or less, the income limit will not affect your credit or exclusion. If your modified AGI is more than $155,860, your credit or exclusion will be reduced. If your modified AGI is $195,860 or more, your credit or exclusion will be eliminated. |
| Generally, if you are married, you must file a joint return to take the adoption credit or exclusion. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements. |
| What does it mean if a credit is refundable? | Top |
| A refundable credit is treated as a payment of tax. For instance, you owe $500 in taxes. You receive EIC in the amount of $1,000. Since EIC is a refundable credit, you receive the full $1,000 credit. That $1,000 credit is treated as a tax payment, and so it would bring the taxes you owe to $0, and the excess, $500, would actually be refunded to you. |
| Which credits are refundable? | Top |
| The Earned Income Credit (EIC)Additional Child Tax CreditFederal Tax Paid on FuelsHealth Coverage Tax Credit Credit for excess social security tax or railroad retirement tax withheld.Credit for tax on undistributed capital gain.. |
| What does it mean if a credit is nonrefundable? | Top |
| A nonrefundable credit can reduce the taxes you owe to $0, but anything in excess of your taxes owed is not refunded to you. |
| Which credits are nonrefundable? | Top |
| The Adoption Credit Child and Dependent Care Credit Child Tax Credit Credit for the Elderly of the DisabledCredit for Prior Year Minimum Tax Education Credits (Hope Credit or Lifetime Learning Credit) Foreign Tax Credit Mortgage Interest Credit Qualified Electric Vehicle CreditRetirement Savings Contribution Credit. |
