Chapter 12Refundable vs Nonrefundable Credits (slide 1 of 2)Refundable vs Nonrefundable Credits (slide 2 of 2)General Business CreditRehabilitation Expenditure Credit (slide 1 of 3)Rehabilitation Expenditure Credit (slide 2 of 3)Rehabilitation Expenditure Credit (slide 3 of 3)Business Energy CreditWork Opportunity Tax Credit (slide 1 of 2)Work Opportunity Tax Credit (slide 2 of 2)Welfare-to-Work Credit (slide 1 of 2)Welfare-to-Work Credit (slide 2 of 2)Research Activities Credit (slide 1 of 4)Research Activities Credit (slide 2 of 4)Research Activities Credit (slide 3 of 4)Research Activities Credit (slide 4 of 4)Low-income Housing CreditDisabled Access CreditCredit For Pension Plan Startup CostsCredit For Employer-Provided Child Care (slide 1 of 2)Credit For Employer-Provided Child Care (slide 2 of 2)Earned Income Credit (slide 1 of 3)Earned Income Credit (slide 2 of 3)Earned Income Credit (slide 3 of 3)Credit for Elderly or Disabled Taxpayers (slide 1 of 2)Credit for Elderly or Disabled Taxpayers (slide 2 of 2)Foreign Tax Credit (slide 1 of 2)Foreign Tax Credit (slide 2 of 2)Adoption Expenses Credit (slide 1 of 2)Adoption Expenses Credit (slide 2 of 2)Child Tax Credit (slide 1 of 2)Child Tax Credit (slide 2 of 2)Child and Dependent Care Credit (slide 1 of 4)Child and Dependent Care Credit (slide 2 of 4)Child and Dependent Care Credit (slide 3 of 4)Child and Dependent Care Credit (slide 4 of 4)Education Tax Credits (slide 1 of 4)Education Tax Credits (slide 2 of 4)Education Tax Credits (slide 3 of 4)Education Tax Credits (slide 4 of 4)Credit For Certain Retirement Plan ContributionsPowerPoint PresentationChapter 12Chapter 12Tax CreditsTax CreditsCopyright ©2004 South-Western/Thomson LearningCopyright ©2004 South-Western/Thomson LearningEugene Willis, William H. Hoffman, Jr.,Eugene Willis, William H. Hoffman, Jr.,David M. Maloney and William A. RaabeDavid M. Maloney and William A. RaabeC11 - 2Refundable vs Nonrefundable Credits (slide 1 of 2)Refundable vs Nonrefundable Credits (slide 1 of 2)•Refundable credits–Paid even if the tax liability is less than amount of credit•Refundable credits–Paid even if the tax liability is less than amount of creditC11 - 3Refundable vs Nonrefundable Credits (slide 2 of 2)Refundable vs Nonrefundable Credits (slide 2 of 2)•Nonrefundable credits–Credit can only be used to offset tax liability–If credit exceeds tax liability, excess is lost•Exception: some nonrefundable credits have carryover provisions for excess•Nonrefundable credits–Credit can only be used to offset tax liability–If credit exceeds tax liability, excess is lost•Exception: some nonrefundable credits have carryover provisions for excessC11 - 4General Business CreditGeneral Business Credit•Comprised of a number of business credits combined into one amount•Limited to net income tax reduced by greater of:–Tentative minimum tax–25% of net regular tax liability that exceeds $25,000•Unused credit is carried back 1 year, then forward 20 years•Comprised of a number of business credits combined into one amount•Limited to net income tax reduced by greater of:–Tentative minimum tax–25% of net regular tax liability that exceeds $25,000•Unused credit is carried back 1 year, then forward 20 yearsC11 - 5Rehabilitation Expenditure Credit (slide 1 of 3)Rehabilitation Expenditure Credit (slide 1 of 3)•Credit is a percentage of expenditures made to substantially rehabilitate industrial and commercial buildings and certified historic structures•Credit rate–20% for nonresidential and residential certified historic structures–10% for other structures originally placed into service before 1936•Credit is a percentage of expenditures made to substantially rehabilitate industrial and commercial buildings and certified historic structures•Credit rate–20% for nonresidential and residential certified historic structures–10% for other structures originally placed into service before 1936C11 - 6Rehabilitation Expenditure Credit (slide 2 of 3)Rehabilitation Expenditure Credit (slide 2 of 3)•To qualify for credit, building must be substantially rehabilitated meaning qualified rehab expenditures exceed the greater of:–The adjusted basis of the property before the rehab expenditures, or–$5,000•Qualified rehab expenditures do not include the cost of the building and related facilities or cost of enlarging existing building•To qualify for credit, building must be substantially rehabilitated meaning qualified rehab expenditures exceed the greater of:–The adjusted basis of the property before the rehab expenditures, or–$5,000•Qualified rehab expenditures do not include the cost of the building and related facilities or cost of enlarging existing buildingC11 - 7Rehabilitation Expenditure Credit (slide 3 of 3)Rehabilitation Expenditure Credit (slide 3 of 3)•Basis in structure is reduced by the credit amount•Subject to recapture if rehabilitated property held less than 5 years or ceases to be qualifying property•Basis in structure is reduced by the credit amount•Subject to recapture if rehabilitated property held less than 5 years or ceases to be qualifying propertyC11 - 8Business Energy CreditBusiness Energy Credit•Credit equal to 10% of expenditures on solar energy and geothermal property•Credit equal to 10% of expenditures on solar energy and geothermal propertyC11 - 9Work Opportunity Tax Credit(slide 1 of 2)Work Opportunity Tax Credit(slide 1 of 2)•Applies to first 12 months of wages paid to individuals falling within target groups and starting work before 12/31/03–Credit limited to a percentage of first $6,000 wages paid per employee•40% if employee has completed at least 400 hours of service to employer•25% if at least 120 hours of service–Deduction for wages is reduced by credit amount•Applies to first 12 months of wages paid to individuals falling within target groups and starting work before 12/31/03–Credit limited to a percentage of first $6,000 wages paid per employee•40% if employee has completed at least 400 hours of service to employer•25% if at least 120 hours of service–Deduction for wages is reduced by credit amountC11 - 10Work Opportunity Tax Credit(slide 2 of 2)Work Opportunity Tax Credit(slide 2 of 2)•Targeted individuals generally subject to high rates of unemployment, including–Qualified ex-felons, high-risk youths, food stamp recipients, veterans, summer youth employees, and certain