Know the Types of Tax Credits
As a general rule, part of the financial burden faced by American taxpayers includes the obligation to fund Social Security, as is provided for in legislation by the Federal Insurance Contribution Act (FICA). Under certain situations, however, this requirement may be excused by the IRS.
For instance, people in areas of work associated with low or nonexistent profit margins may be given a tax credit for their FICA obligations. Students are often covered under this exemption, including those working toward their graduate degree or currently enrolled medical students.
College students beneath the graduate level who are employed by their educational institution in some capacity may also have Social Security exemptions due to them. Non-students employees of the same institutions will not, however, generally be extended the same relief. Charities and non-profit groups also normally face FICA obligations.
Earned Income Tax Credit means tested program. This term pertains to the program's primary criterion being the financial fitness of taxpayers, through which the program has been used as an instrument of the government's anti-poverty policy. Significant reforms to the Earned Income Tax Credit were enacted in 1987, 1990, 1993 and 2001.
The program has also inspired the creation of similar provisions in the tax policies of individual states, which by 2006 numbered twenty. The definition for "earned income" as is applicable to these laws can be found in American tax code. The financial situation, living conditions, family arrangement, and ability to take of him or herself found of a taxpayer together comprise the primary criteria by which the IRS determines eligibility for the Earned Income Tax Credit.
Education Tax CreditsHOPE Credit Housing Tax Credit
Lifetime Learning CreditAdoption CreditChild and Dependent Care CreditHistoric Preservation Tax Credithistoric occurs through the National Register of Historic Places, which must include either a specific listing for the building or a reference to the region in which it is registered for historicity to be reliably and legally established, and is provided by the Department of the Interior.
In order for the restoration of a historic building to be accorded a tax credit, it must be in commercial use while the restoration is proceeding. Expenses incurred in such an activity can be offset at a rate of 20%, but only if it is demonstrated by the owner that the budget required for the initiative exceeds its conceivable commercial value.
Energy STARbiomass, category, devices for heating, ventilating and air conditioning, collection systems for wind and sun-based energy, materials for insulation, geothermal heat pumps, doors, windows, metal and asphalt roofs, and fuel cells. Coverage under the Energy STAR provides the ability to offset up to 30% of the cost of such a device.
Application for tax credit consideration under the Energy STAR rubric can be obtained through an IRS form. In general, applicable taxpayers are limited to homeowners, as opposed to renters, though vacation homes held for significant portions of the year may also be accorded coverage.
NEXT: FICA or the Social Security Tax Credit