Lesson 9

1. Lesson 9 Miscellaneous Credits

2. Objectives • Determine eligibility for the Credit for the Elderly or the Disabled • Calculate the Credit for the Elderly or the Disabled • Calculate the Credit for Qualified Retirement Savings Contributions - Form 8880 • Calculate the Residential Energy Credits for nonbusiness energy property and residential energy efficient property using Form 5695. • Calculate the Qualified Electric Vehicle Credit using Form 8834. • Calculate the Alternative Motor Vehicle Credit using Form 8910. • Accurately report the Foreign Tax Credit if Form 1116 is not required • Be aware of the Mortgage Interest Credit

3. Intake/Interview Process Form 13614 – Intake and Interview Sheet - Credits Section

4. Credit - Elderly/DisabledQualifications • U.S. Citizen or resident • At least age 65 or retired on permanent and total disability • AGI is less than: • Single, Head of Household, or Qualifying Widow(er) $17,500 • MFJ (both spouses qualified) $25,000 • MFJ (one spouse qualified) $20,000 • MFS (didn’t live together) $12,500

5. Credit – Elderly/DisabledComputation • Nontaxable Social Security or nontaxable pension(s) must be less than: • Single, Head of Household, or Qualifying Widow(er) $5,000 • MFJ (both spouses qualify) $7,500 • MFJ (one spouse qualifies) $5,000 • MFS (didn’t live together) $3,750 • Use Schedule 3 if filing Form 1040A, use Schedule R if filing Form 1040 • Substantial Gainful Activity

6. Credit for Qualified Retirement Savings Contributions • Contributions to a retirement plan or IRA may be eligible for a tax credit • Non-refundable credit • Maximum credit is $1,000 • Limitations based on: • Filing status • Adjusted Gross Income • Qualified contributions

7. Credit for Qualified Retirement Savings Contributions • Form 8880 is used to calculate the credit • Chart for the applicable percentage is part of the form • If the taxpayer has received any distributions from a retirement plan, you may need to complete line 4 on the Form 8880

8. Residential Energy Credits • Nonbusiness Energy Property Credit • Residential Energy Efficient Property Credit • Form 5695

9. Qualified Electric Vehicle Credit • Qualified Electric Vehicle • Form 8834

10. Alternative Motor Vehicle Credit • Requirements - Alternative Motor Vehicle • Form 8910

11. Foreign Tax Credit • Created to avoid double taxation • If the Taxpayer paid income, war profits, excess profit taxes to any: • Foreign country, U.S. possession, political subdivision or agency of the country or possession. • May need to consult paid tax preparer to determine if the tax paid is eligible for the foreign tax credit.

12. Foreign Tax Credit • If all of the following requirements are met, Form 1116 is not required: • Foreign-source income is from interest and dividends only • The total of the foreign taxes does not exceed $300 ($600 for MFJ) • All of the foreign taxes were legally owed and paid to countries recognized by the U.S. as eligible for the credit

13. Mortgage InterestCredit • Hold a qualified Mortgage Interest Credit Certificate on main home • Must reduce mortgage interest deduction on Schedule A (if itemizing) • Use Form 8396 to figure credit on mortgage interest paid • May carry forward unused credit for up to three years

14. Quality Review (QR) Form 8158 – Quality Review Checklist Adjustments, Deductions and Credits Section

15. Lesson Summary • Credit for the Elderly or the Disabled • Credit for Qualified Retirement Savings Contributions • Residential Energy Credits • Qualified Electric Vehicle Credit • Alternative Motor Vehicle Credit • Foreign Tax Credit • Mortgage Interest Credit

16. Lesson 9 International Segment Foreign Tax Credit

17. Objectives • Determine which taxes are eligible for the Foreign Tax Credit • Apply the criteria for claiming the Foreign Tax Credit • Accurately compute the foreign tax credit using Form 1116 or tax preparation software • Assist taxpayer in compiling the documents necessary for a paid tax preparer to complete the return

18. Intake/Interview Process Form 13614 – Intake and Interview Sheet - Credits Section

19. What Taxes Qualify • Foreign Source Income – Taxed by Foreign Country • The following are the basic requirements: - Tax imposed must be similar to income tax imposed in the US - Taxpayer must not receive any kind of specific economic benefit from the payment of the tax - Tax must be imposed by “eligible foreign country”

20. Types of Income • Passive Income • High Withholding Tax Interest • General Limitation Income

21. Form 1116 • Part I – Used to report the taxable income or loss from sources outside the United States • Part II – Used to report foreign taxes paid or accrued • Part III – Used to compute the amount of the Foreign Tax Credit

22. Quality Review (QR) Form 8158 – Quality Review Checklist Adjustments, Deductions and Credits Section

23. International Summary • To be eligible for the Foreign Tax Credit, foreign taxes must be: - Based on foreign sourced income - Similar to US income tax - Free of any specific economic benefit - Paid to an “eligible foreign country” • The Foreign Tax Credit is computed using Form 1116