OLT TAX CORNER~ Other Credits

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OLT TAX CORNER ~ Other Credits

Other Credits FAQ
I am under 65 and disabled. Do I qualify for the credit for the elderly and disabled? How do I claim the retirement contribution credit? What is the Clean Vehicle Credit? Can you explain the adoption credit? What does it mean if a credit is refundable? Which credits are refundable? What does it mean if a credit is nonrefundable? Which credits are nonrefundable?

I am under 65 and disabled. Do I qualify for the credit for the elderly and disabled?

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.

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How do I claim the retirement contribution credit?

You may be able to take this credit if you, or your spouse if filing jointly, made:

Contributions (other than rollover contributions) to a traditional or Roth IRA,
Elective deferrals to a 401(k), 403(b), governmental 457, SEP, or SIMPLE plan,
Voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the Federal Thrift Savings Plan), or
Contributions to a 501(c)(18)(D) plan.

Your Adjusted Gross Income has to fall under the limit to qualify for this credit.

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What is the Clean Vehicle Credit?

Clean Vehicle credit of up to $7,500 ($40,000 for a vehicle with a GVWR of 14,000 pounds or more).for purchasing a new electric vehicle under the renamed Clean Vehicle Credit,for the first time people purchasing used electric vehicles from 2024 to 2032 eligible for a tax credit up to the lesser of $4,000 or 30% of the sales price, depending on their income.

Update: The New Clean Vehicle Credit, Previously-Owned Clean Vehicle Credit, and Qualified Commercial Clean Vehicle Credit are not available for vehicles acquired after Sept. 30, 2025.

The vehicle must be placed in service for you to claim the credit. If a vehicle is placed in service after Sept. 30, 2025, you must have acquired the vehicle on or before Sept. 30, 2025, to be eligible for the credit. You can demonstrate acquisition by entering into a binding written contract and making a payment on the vehicle on or before Sept. 30, 2025. A vehicle is placed in service when you take possession of the vehicle.

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Can you explain the adoption credit?

You may be able to take a tax credit 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.

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.

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What does it mean if a credit is refundable?

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.

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Which credits are refundable?