Coming up soon is a new application period for a valuable California business tax credit. The CA Governor’s Office of Business and Economic Development has announced that, for fiscal year 2019-2020, a total of $236,808,527 in CA Competes Tax Credits is available. Learn more about applying here: https://bit.ly/2nxiNGc. Applications will be accepted during the following periods: July 29 through August 19, 2019 ($90 million total); January 6 through January 27, 2020 ($75 million total); and March 9 through March 30, 2020 ($71.8 million, plus unallocated amounts from previous periods). This credit is an income or franchise tax credit available to businesses that come, stay or expand in CA. If you have questions or are interested in applying, please contact your Linkenheimer CPA.
Is your business hiring this summer? If the employees come from certain “targeted groups,” you may be eligible for the Work Opportunity Tax Credit (WOTC). This includes youth whom you bring in this summer for two or three months. The maximum credit employers can claim is $2,400 to $9,600 for each eligible employee.
10 targeted groups
An employer is generally eligible for the credit only for qualified wages paid to members of 10 targeted groups:
- Qualified members of families receiving assistance under the Temporary Assistance for Needy Families program,
- Qualified veterans,
- Designated community residents who live in Empowerment Zones or rural renewal counties,
- Qualified ex-felons,
- Vocational rehabilitation referrals,
- Qualified summer youth employees,
- Qualified members of families in the Supplemental Nutrition Assistance Program,
- Qualified Supplemental Security Income recipients,
- Long-term family assistance recipients, and
- Qualified individuals who have been unemployed for 27 weeks or longer.
For each employee, there’s also a minimum requirement that the employee have completed at least 120 hours of service for the employer, and that employment begin before January 1, 2020.
Also, the credit isn’t available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (for […]
While the number of plug-in electric vehicles (EVs) is still small compared with other cars on the road, it’s growing — especially in certain parts of the country. If you’re interested in purchasing an electric or hybrid vehicle, you may be eligible for a federal income tax credit of up to $7,500. (Depending on where you live, there may also be state tax breaks and other incentives.)
However, the federal tax credit is subject to a complex phaseout rule that may reduce or eliminate the tax break based on how many sales are made by a given manufacturer. The vehicles of two manufacturers have already begun to be phased out, which means they now qualify for only a partial tax credit.
Tax credit basics
You can claim the federal tax credit for buying a qualifying new (not used) plug-in EV. The credit can be worth up to $7,500. There are no income restrictions, so even wealthy people can qualify.
If you’re the parent of a child who is age 17 to 23, and you pay all (or most) of his or her expenses, you may be surprised to learn you’re not eligible for the child tax credit. But there’s a dependent tax credit that may be available to you. It’s not as valuable as the child tax credit, but when you’re saving for college or paying tuition, every dollar counts!
Background of the credits
The Tax Cuts and Jobs Act (TCJA) increased the child credit to $2,000 per qualifying child under the age of 17. The law also substantially increased the phaseout income thresholds for the credit so more people qualify for it. Unfortunately, the TCJA eliminated dependency exemptions for older children for 2018 through 2025. But the TCJA established a new $500 tax credit for dependents who aren’t under-age-17 children who qualify for the child tax credit. However, these individuals must pass certain tests to be classified as dependents.
A qualifying dependent for purposes of the $500 credit includes:
- A dependent child who lives with you for over half the year and is over age 16 and up to age 23 if he […]
The Tax Cuts and Jobs Act created a new federal tax credit for employers that provide qualified paid family and medical leave to their employees. It’s subject to numerous rules and restrictions and the credit is only available for two tax years — those beginning between January 1, 2018, and December 31, 2019. However, it may be worthwhile for some businesses.
The value of the credit
An eligible employer can claim a credit equal to 12.5% of wages paid to qualifying employees who are on family and medical leave, if the leave payments are at least 50% of the normal wages paid to them. For each 1% increase over 50%, the credit rate increases by 0.25%, up to a maximum credit rate of 25%.
An eligible employee is one who’s worked for your company for at least one year, with compensation for the preceding year not exceeding 60% of the threshold for highly compensated employees for that year. For 2019, the threshold for highly compensated employees is $125,000 (up from $120,000 for 2018). That means a qualifying employee’s 2019 compensation can’t exceed $72,000 (60% × $120,000).
Employers that claim the family and medical leave credit […]
Under pre-Act law, a taxpayer could claim a child tax credit of up to $1,000 per qualifying child under the age of 17. The aggregate amount of the credit that could be claimed phased out by $50 for each $1,000 of AGI over $75,000 for single filers, $110,000 for married filers, and $55,000 for married individuals filing separately. To the extent that the credit exceeded a taxpayer’s liability, a taxpayer was eligible for a refundable credit (i.e., the additional child tax credit) equal to 15% of earned income in excess of $3,000 (the “earned income threshold”). A taxpayer claiming the credit had to include a valid Taxpayer Identification Number (TIN) for each qualifying child on their return. In most cases, the TIN is the child’s Social Security Number (SSN), although Individual Taxpayer Identification Numbers (ITINs) were also accepted.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the child tax credit is increased to $2,000, and other changes are made to phase-outs and refund-ability during this same period, as outlined below. (Code Sec. 24(h)(2), as added by Act Sec. 11022(a))
Phase-out. The income levels at which the credit phases out are increased to $400,000 for married taxpayers filing jointly ($200,000 […]
Many restaurant owners are missing out on a significant tax savings opportunity (free money!) by failing to claim the FICA tip credit when they file their tax returns. The “Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips”, otherwise known as the “FICA tip credit”, is a nonrefundable credit that is available to taxpayers whose employees are receiving tips from customers for providing, delivering, or serving food or beverages for consumption. If you as the employer paid social security and Medicare on these tips as they were reported to you by the employee throughout the year, you are likely entitled to this tax credit.
The credit is limited if you are not paying your employees minimum wage, but as long as you are paying minimum wage, you should be entitled to a credit for the entire portion of FICA taxes paid on these tips. In order to estimate the tax benefit of your FICA tip credit, you can multiply the “social security tips”, box 7 of your Form W-3, Transmittal of Wage and Tax Statements, by 7.65%. This credit is a nonrefundable credit, meaning that you […]
The IRS recently reminded taxpayers that back-to-school time is a good time to see if they qualify for education-related tax credits. The American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC) are available to taxpayers who pay qualifying expenses for eligible students. The maximum AOC is $2,500 per student, 40% refundable, and available for the first four years of postsecondary education. The LLC is limited to $2,000 per tax return, nonrefundable, and available to both graduate and undergraduate students. Only one credit can be claimed for a particular student in a tax year.