Tax Credit & Deduction Research
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Education Credits
What are Education Credits?
Education Credits include a variety of opportunities for individuals to reduce their taxes. At the Federal level, two Education Credits exist: The American Opportunity Tax Credit and the Lifetime Learning Credit. At the State level, local programs may exist that allow individuals to make donations that can benefit the school a child is attending. In turn, this creates eligibility for State tax savings.
What are the advantages of Education Credits?
At the Federal level, the American Opportunity Tax Credit allows for up to $2,500 in credit per eligible student. The Lifetime Learning Credit allows for up to $2,000 in credit for the particular tax year. Although these two credits can be claimed in the same year, they cannot be claimed for the same student. Furthermore, the State expands its eligibility to both passthrough business owners and corporations, both of which can obtain eligibility of up to $10,000 and 75% of their annual tax liability, respectively.
Who qualifies & why should you adopt?
Individuals who pay for education expenses for a student enrolled at an eligible education institution, whether that student is themselves, their spouse, or their dependent, would qualify for both the American Opportunity Tax Credit and the Lifetime Learning Credit. Since these individuals already pay out of pocket education expenses, they should utilize these credits for tax savings.
Entertainment Credits
What are Entertainment Credits?
Entertainment Credits are state-subsidized tax incentives that have created a market for film, television, and digital entertainment companies looking to produce in a tax-friendly state. In any given year, massive quantities of unused business entertainment credits are typically available to individuals with state income tax liabilities.
What are the advantages of Entertainment Credits?
Entertainment Credits allow acquiring individuals to pay off state tax liabilities at a reduced dollar amount. Credits generally sell for $0.88 to $0.94 per every $1.00 of tax. Therefore, individuals can purchase large quantities of credits for a defined rate that will pay off a higher state tax. Additionally, these credits can be purchased for specific years, so individuals with back tax returns can potentially use Entertainment Credits to reduce additional amounts owed in penalties and interest.
Who qualifies & why should you adopt?
Any individual with a state income tax obligation in a state that provides this tax savings program qualifies to utilize Entertainment Credits. Self-employed persons, sole proprietors, or any professional without a fixed, consistent tax withholding should explore Entertainment Credits. Because the providing states treat the purchase of such credits as occurring at the beginning of the calendar year, taxpayers also benefit by preventing state underpayment penalties.
Georgia GOAL
What is Georgia GOAL?
Through the Georgia Education Expense Tax Credit, the State of Georgia provides an opportunity for taxpayers to redirect a portion of their state tax liability in order to enhance the education system in the state.
What are the advantages of Georgia GOAL?
Georgia GOAL is a tax credit and, it provides a dollar-for-dollar reduction to an individual’s tax liability. A participating individual, will receive a credit equal to the amount of dollars contributed to the program. Furthermore, contributions to the program are not only eligible for state credits, but they are also eligible for federal tax deductions.
Who qualifies & why should you adopt?
Both individuals and businesses are eligible for Georgia GOAL, and both should take advantage of it. Additionally, contributions to the program are used to provide scholarships for students to enroll in accredited private schools in the state.
The Georgia GOAL contribution limits are as follows: $1,000 for single taxpayers, $2,500 for joint filers, $10,000 for owners of pass-through, and 75% of Georgia tax liability for C-Corporations.
Low-Income Housing Credits
What are Low-Income Housing Credits?
Low-Income Housing Credits provide incentives for private equity investments into the development of affordable housing. This program incentivizes funding for development costs of low-income housing by allowing investors to earn federal tax credit equal to a percentage of the costs incurred for the development of the housing.
What are the advantages of Low-Income Housing Tax Credits?
Individuals investing in these funds are treated as if they are making capital contributions to the developing partnership which, in turn, exchanges Low-Income Housing Credits over a 10 year period. Although the determination of the credits is subject to a complex calculation, the developing partnership will typically earn in credits up to 70% of the costs incurred for the development of low-income units in a rental housing project.
Who qualifies & why should you adopt?
Any individual interested in minimizing Federal tax obligations, with risk-tolerable cash, should explore Low-Income Housing Credits.
Opportunity Zones
What are Opportunity Zones?
Opportunity Zones are new community development programs that encourage long-term investments in both low-income urban and rural communities. The Opportunity Zones program provides its investors with tax incentives to re-invest capital gains into what are known as “Opportunity Funds”. These funds are then dedicated to investing in Opportunity Zones.
What are the advantages of Opportunity Zones?
When Opportunity Zone investors designate their capital to work in low-income areas, a temporary tax deferral on capital gains of the contributed assets is given. Investors also receive a step-up in basis for capital gains reinvested in Opportunity Funds. Finally, should an investment in an Opportunity Fund be held for 10 years or more, all gains accumulated from the investment while held in the fund are permanently exempt from capital gains tax.
Who qualifies & why should you adopt?
Any individual, trust, business, or non-profit may participate, as long as the participant follows the guidelines set out by the statute and Treasury.
Research & Development Tax Credits
What are Research & Development Tax Credits?
These general business tax credits are granted to businesses that incur research and development costs in the United States.
What are the advantages of Research & Development Tax Credits?
At both Federal and State levels, the Research & Development Tax Credit amount is subject to a set of tests. The traditional calculation of the credit provides for 20% of the taxpayer’s qualified research expenditures that exceed a calculated base amount.
In Georgia, Research & Development Tax Credits may be used to offset up to 50% of net state income tax liability after all other credits have been applied. Any unused credits can be either carried forward for up to 10 years, or even applied to state payroll withholding tax.
Who qualifies & why should you adopt?
Any new or existing company that has increased its qualified research spending would be eligible for these credits. CPA’s and Tax Advisors play a critical role in collaborating with the company to determine the amounts of eligible Research & Development Tax Credits. Additionally, partnerships eligible for Research & Development Tax Credits will pass the allocated amounts through to their partners. These amounts are then applied at the individual tax level.
Section 45L Tax Credits
What are Section 45L Tax Credits?
Section 45L Tax Credits (“Energy Efficient Home Credits” or “Green Credits”) are tax credits issued to developers of energy efficient homes and apartment buildings. The credit is $2,000 per “dwelling unit” for developments with energy-use levels significantly lower than certain national energy standards. Also, the credit can be retroactively obtained, as the construction phase for these developments must have occurred between January 1, 2006 and December 31, 2017.
What are the advantages of Section 45L Tax Credits?
Homebuilders and multifamily developers receive a reward for constructing “modern style homes”, which are frequently built on energy friendly foundations. The award, a $2K tax credit per qualifying dwelling unit, is determined based on the 2006 International Energy Conservation Code. Today’s energy efficient building trends frequently meet these standards, making eligibility for the Section 45L Tax Credit rather attainable.
Who qualifies & why should you adopt?
Businesses operating as both Homebuilders and Multi-Family Developers may qualify for the credit. The credit is claimed by the “eligible contractor”, which is defined as the person who constructed the qualified energy efficient real estate.
Eligibility for the 45L Tax Credit is determined by an independent and qualified third-party, while certification of the credit is obtained through a detailed energy analysis. This analysis identifies the number of qualifying dwelling unit(s), verification of met energy standards, and the amount of eligible credit.