Tax Credits | TaxConnections

20 Feb 2024

What Tax Credits Are Available For A Taxpayer In California?

According to a recent article attributed to Nerd Wallet, tax credits available to an individual taxpayer include:

California State Tax Credits

Tax credits are a type of benefit that decreases your taxes owed by the credit amount. Some credits may also be refundable, meaning if the credit amount exceeds how much you owe in taxes, you might be able to get the overage back in the form of a refund.

Here is an overview of a few popular tax credits available in California for the 2023 tax year (taxes filed in 2024).

California Earned Income Tax Credit (CalEITC)

The CalEITC is a tax benefit that mirrors the federal earned income tax credit. Californians with earned income and federal AGI of up to $30,950 in 2023 may be eligible for a tax credit of up to $3, The exact credit amount depends on your filing status and the number of qualifying children. (People without kids also qualify.)

California Young Child Tax Credit (YCTC)

The refundable young child tax credit is another state-level tax credit modeled after the federal version of the child tax credit. People who qualify for the California earned income tax credit mentioned above and who also had a child younger than 6 by the end of the 2023 tax year are generally eligible for the YCTC. The maximum credit for 2023 is $1,117. The credit begins to phase out for those with an earned income of $25,775 and above and is not available for anyone making above $30,931.

Written by TaxConnections Admin | Posted in California Tax Credits And Incentives • California Taxes • Tax Credits • TaxConnections

08 May 2020

COVID-19 Paid Leave Tax Credits For Small And Midsize Businesses

Small and midsize employers can claim two new refundable payroll tax credits. The paid sick leave credit and the paid family leave credit are designed to immediately and fully reimburse eligible employers for the cost of providing COVID-19 related leave to their employees.

Here are some key things to know about these credits.

Coverage
• Employers receive 100% reimbursement for required paid leave.
• Health insurance costs are also included in the credit.
• Employers do not owe their share of social security tax on the paid leave and get a credit for their share of Medicare tax on the paid leave.
• Self-employed individuals receive an equivalent credit.
Fast funds
• Reimbursement will be quick and easy.
• The credit provides a dollar-for-dollar tax offset against the employer’s payroll taxes
• The IRS will send any refunds owed as quickly as possible.

To take immediate advantage of the paid leave credits, businesses should use funds they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can request an expedited advance from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

IRS

Written by IRS | Posted in Small Business • Tax Credits

12 Nov 2019

Important Things To Know About Tax Credits

With the tax filing season quickly approaching, the Internal Revenue Service recommends taxpayers take time now to determine if they are eligible for important tax credits.

This is the second in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS recently updated its Get Ready page with steps to take now for the 2020 filing season.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for working people with low to moderate incomes who meet certain eligibility requirements. Because it’s a refundable credit, those who qualify and claim EITC pay less federal tax, pay no tax or may even get a tax refund. EITC can mean a credit of up to $6,557 for working families with three or more qualifying children. Workers without a qualifying child may be eligible for a credit up to $529.

To get the credit, people must have earned income and file a federal tax return — even if they don’t owe any tax or aren’t otherwise required to file.

Written by IRS | Posted in IRS Notice • Tax Credits

18 Sep 2019

Lowering A Corporation’s Effective Tax Rate With Tax Credits

Corporate Tax Directors are in a unique position to add immense value by exploring ways to lower their corporation’s effective tax rate. Tax Directors must walk a fine line of getting this important mission accomplished or being too creative in taking unnecessary risks.

Insured Tax Credit Investments provide a practical option to lower a corporation’s effective tax rate with the downside covered by insurance.

How do Tax Credits work?

Tax credit programs are government sponsored initiatives designed to encourage taxpayers to help finance solar projects, historic building redevelopment and affordable housing
Corporate taxpayer repurposes tax payment reserves into qualifying tax credit projects
Taxpayer receives tax credits, project cash flows and an exit payment
Tax credit investors generate a return on their tax payments, thus boosting their after-tax income and lowering their effective tax rate
Returns are predominantly uncorrelated with project performance – taxpayers earn the tax credits as long as the project maintains regulatory compliance.
An insurance policy eliminates the compliance risk and, as such, allows a taxpayer to generate a yield on their tax payments without the risk of losing the tax credits