SUMMER CAMPS MAY QUALIFY FOR A TAX CREDIT

Below is a reminder from the IRS that summer camps for your children may qualify for a tax credit. If you have any questions about child care credit let me know.

Larry Kopsa CPA

Did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

1. The cost of day camp may count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. If your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
4. The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

NON-BUSINESS ENERGY PROPERTY CREDIT

Larry, I recently heard some news of a $1,500 energy credit. I have already used the $500 energy credit on my 2007 taxes. Do I still get the $1,500 credit on my taxes this year, even if I previously used the $500 credit?

Thomas

Thomas, you are referring to the Non-Business Energy Property Credit. Taxpayers do get the $1,500 credit even if they have used the previous $500 credit. Here's some more information that may help you to understand the credit better.

The Credit is available during the 2009 & 2010 tax year.

The Credit is nonrefundable.

The amount allowable of the credit is a lifetime cap of $1,500. This amount can be reached by taking 30% on the following items:

• Insulation, exterior windows or skylights, exterior doors, and certain metal or asphalt roofing.


• Energy –efficient property including electric heat pump water heaters, electric heat pumps, central air conditioners, natural gas, propane, or oil heaters and biomass fuel stoves.


• Qualified natural gas, propane, or oil furnaces or boilers.


• Advanced main air circulating fans.

The $1,500 can be claimed in 2009 and 2010 even if they have used the $500 credit in 2006 and 2007.

If only a portion of the $500 credit was used, the remainder can not be carried forward.

The items must meet the criteria of the International Energy Conservation Code.

QUESTION ON BEGINNING FARMER TAX CREDIT

Larry, I'm renting my ground to a young farmer that's just starting out. Are there any tax incentives available to me that I don't know about? Bill

Bill, There is a credit available on Nebraska Income Tax returns that may apply to your situation. The following are the essential facts that must be present:

1. The farmer that is renting the land and/or equipment must be a qualified beginning farmer. In order to qualify as a beginning farmer, they must meet the following characteristics:

• Must be a Nebraska resident
• Have a net worth of less than $200,000
• Have farming experience/education
• Plan to seek livelihood in agriculture
• Provide the majority of the day-to-day physical labor and management
• Not closely related to the owner
• Farmed for less than 10 of the last 15 years

2. The owner must be a qualified owner. In order to be considered a qualified owner, you must meet the following characteristics:

• Must be a Nebraska resident
• 50% of your gross annual income, for income tax purposes, must be from farming for more than 5 of the last 15 years
• You must have provided the majority of the day-to-day physical labor and management for more than 5 of the last 15 years
• You must be eligible to receive a state income tax credit
• You must not be closely related to the beginning farmer
• You must rent the property to this beginning farmer for a minimum of 3 years. This means you must have a 3 year lease.

3. The credit is actually a credit for the owner. However, both the owner and the beginning farmer must submit an application to Nebraska. The applications are sent in together and then the application must be approved by the Beginning Farmer Tax Credit Act board.

4. If you do qualify, you will then get a credit for each of the 3 years of 10% of the cash rent received, or 15% of cash equivalent of crop share rent.

As you can see, there are several characteristics that we need to ensure you meet in order to qualify for this credit. On your side of the qualifications, the one we need to ensure works is the 50% of your gross annual income is from farming more than 5 out of the last 15 years. As we look at this, we actually have to look at gross rent income received, your wife’s wages, and gross seed income, compared to farm income. This could create an issue. In addition, we would need to find out more information about the young farmer you are renting to.

Once you have a chance to review this information, please contact me to let me know your thoughts on the qualifications to see if we need to continue going further in gathering information. If you have any questions or concerns, please feel free to contact me.

It is a pleasure serving you.

Larry Kopsa CPA

TAX BREAKS FOR HYBRID VEHICLES

As the price of gas continues to go up, we have been receiving questions about hybrid vehicles. You may find the following information helpful.

A purchaser of a hybrid passenger automobile is allowed a tax credit of from $400 to $3,400 depending on the model. A credit is usually more advantageous than a deduction because a tax credit is subtracted dollar-for-dollar off the bottom line of your federal tax bill, while a deduction simply reduces taxable income. The credit applies to both business and personal vehicles.

The amount of the hybrid credit depends on the fuel efficiency of the vehicle. The more gas it saves, the higher the credit. However, calculating the credit is a bit complicated, with the exact amount of your credit depending on three separate factors: the weight of the vehicle, its fuel economy, and its lifetime fuel savings. IRS has certified various hybrid models made by Ford, General Motors, Toyota, Honda, Nissan, and Mazda as qualifying for the credit. In each case, the certification specifies the amount of the credit for the particular model.

However, the law limits the credits to 60,000 hybrid vehicles from each automaker. This total includes all brands sold by the particular automaker. Thus, for example, the Ford total includes Ford and Mercury hybrids. Once a manufacturer has sold 60,000 hybrid vehicles, the tax credit for that manufacturer's hybrids is slowly reduced over the next five consecutive quarters, eventually dropping to zero.

Honda hybrid sales reached the 60,000-vehicle limit during the calendar quarter ended Sept. 30, 2007. As a result, the credit for Honda hybrid vehicles is being phased out. For Honda hybrid vehicles purchased after Dec. 31, 2007 and before July 1, 2008, the credit is 50% of the otherwise allowable credit amount. Honda hybrids purchased after June 30, 2008 and before Jan. 1, 2009 qualify for 25% of the otherwise allowable credit. Toyota hybrid sales reached the 60,000-vehicle limit during the calendar quarter ended June 30, 2006. Accordingly, the credit for Toyota hybrids has completely phased-out. After Sept. 30, 2007, purchasers of Toyota (including Lexus) hybrid vehicles cannot claim the related tax credit. Hybrid vehicles built by the other hybrid manufacturers haven't yet reached the 60,000-vehicle limit, and thus continue to qualify for the maximum credit allowable.

Here are some additional points about the credit:

In general, the credit is allowed to the vehicle owner, including the lessor of a vehicle subject to a lease. Thus, if you lease a hybrid (rather than purchase it), you won't qualify for the credit.

The credit is allowed in the year the vehicle is placed in service.

The vehicle must be used predominantly in the U.S. to qualify for the credit.

The original use of the hybrid auto must begin with you, i.e., the vehicle must be new.

The credit isn't allowed if you buy the hybrid auto for resale.

No credit is allowed for the portion of the cost of any property taken into account under Code Sec. 179, the expensing election provision.

Please email us at lkopsa@kopsaotte.com if you would like to receive additional general information about hybrid vehicles, or if you would like to be advised in connection with a specific purchase.