Chapter 8 - Credits, Losses, and Additional Taxes Flashcards
What is General Business Credits?
is a set of more than 30 credits commonly available to businesses. The credits are reported on 3800.
For individuals, what is GBC limits?
GBC is limited to net income tax minus the greater of a) the tentative alternative minimum tax or 25% of net regular tax liability over 25000.
Small Employer Insurance Credit
1) Tax credit provides a 50% credit for the cost of premiums paid toward health insurance coverage.
it reduces the deduction for health insurance premiums. Limited to 2 consecutive years.
What is the eligibility Small Employer Insurance credit for small employers
1) The credit is available to small employers with 25 or fewer employers and average annual wages of less than 57,400
Disabled Access Credit Eligibility
Eligibility is for small businesses, partnerships, and S corporations that don’t have more than 30 FT employees or more than 1 million gross receipts.
reported on 8826
Disability Access limit
credit is equal to 50 % of qualifying expenditures that fall between a 250 threshold and a 10250 cap.
5000 [(10250 - 250) x 50%]
Work opportunity Tax credit
credit for wages paid to individuals from certain target groups during their first year.
5884 is used to report
- Any business deduction for the wages must be reduced by the amount of the credit
How many hours must be worked for WOTC? What’s the threshold for full or partial credit?
at least 120
400 hours = 40%
120 to 400 = 25%
What are the WOTC’s qualifying classes that have maximum credit?
What are the other target groups for WOTC?
1) IV A recipients of temporary assistance to needy families
2) veterans
3) ex felons
4) designated community residents vocational rehabilitation referrals
5) Vocational rehabilitation referrals
6) supplemental nutrition assistance program ( SNAP) benefits recipients
7) SSI recipients
8) LT family assistance recipients
9) Summer youth employees
10) LT unemployment recipients
What are WOTC’s qualifying wages ?
1) remuneration for employment
2) Amount received under accident and health plans
3) Contributions by employers to accident and health plans
4) Educational assistance
5) Dependent care expenses
Investment Tax Credit
is depreciable or amortizable property as list below (must be certified by the secretary of Treasury):
1) ( Business ) energy Credit
2) Rehabilitation Credit
3) Qualifying Advanced Coal Project Credit
4) Qualifying Gasification Project Credit
5) Qualifying Advanced Energy Project Credit
( Business) Energy Credit
for businesses that invest in energy conserving property
The credit is equal to the basis of the property placed in service during the year times the credit percentage.
( Business ) Energy Credit Percentages Limits
Qualified property and their corresponding energy percentages range from 10 to 30 percent.
50% of the credit taken reduces depreciation of the property’s basis.
Rehabilitation Credit
equal to 20% ratably over 5 years ( i.e., 4% per year ) for certified historical structures expenditures paid or incurred after 2017.
Expenditures must exceed the larger of 5000 or the structure’s AB.
Qualifying Advance Coal Project
The investment in qualified property that is used in a qualified advanced coal project.
Credit is equal to the basis of the property placed in service during the year times the credit percentage.
Qualifying Advance Coal Project percentage limits
Qualified property and their corresponding credit %:
1) integrated gasification combined cycle 20%
2) Other Advanced coal based projects, 15%
3) Advanced coal based generation technologies, 30%
Qualifying Gasification Project
investments in a qualified property that have gasification project(s).
Credit basis is 20% with an increase to 30% if 75% pf carbon dioxide emissions are captured.
Disallowed if Advanced Coal Credit is allowed .
Qualifying Advanced Energy Project
Credit = 30%
Disallowed if property available has selected Energy Credit, Advanced Coal Project Credit, or the Gasification Project Credit .
Research Credit
Eligible for small businesses with 50 million or less in gross receipts. The tax credit is for expenses relating to increasing research ( i.e., technological in nature) activities in a trade or business.
Research Credit formula
Pension Plan Start up Costs eligibility
for small employers ( 100 or fewer employees) for the first 3 tax years
Pension Plan start up costs credit
50% of the start up cost incurred to create or maintain a new employee retirement plan
limited to the greater of 500 or the lesser of 250 for each eligible employee who is not a highly compensated employee or 5000.
Employer Provided Childcare credit
to create an incentive for small and medium sized businesses to provide childcare for their employees
Employer Provided Childcare credit percentages
25% of qualified expenses paid for the employee childcare and 10% of qualified expense paid for childcare resource and referral services.
Limited to 150,000 and file 8882
Sec 179 do not qualify
FICA Tip Credit
NRF for employer’s portion of FICA Taxes paid ( incurred ) on employee cash tips exceeding the tips satisfying minimum wage adjustments
Paid Family and Medical Leave Credit
through 2025
employers pay family and medical leave to their employees may credit 12.5% to 25%
12.5 applies to payments of at least 50% of wages normally paid to the employee. It increases by .25% above 50%.
File 8994
Paid Family and Medical Leave Credit - 6 types of qualified leave
1) Birth of a child and care for that child
2) Adoption and foster care placement of a child with the employee
3) Care for spouse, child, or parent with a serious health condition
4) Employee being unable to perform work function due to health condition.
5) Urgent need due to spouse, child , or parent being on active military duty ).
6) Care for a service member ( spouse, child, parent , or next of kin ).
Paid family and medical leave credit: State and local law
pay that is required by state or local law doesn’t count toward the 50%.
Paid family and medical leave credit: Salary and other requirements
must have at least 81,000 to qualify.
employer must have a written policy
at least have 2 weeks of leave to FT and prorated for PT
