Refundable Credits:
5 [CASHEW]
C – Child Tax Credit (refund is limited)
A – AOC => American Opportunity Credit (40% Refundable)
S – SS => Excess SS Paid
H – Hope Scholarship Credit Portions [Old name for AOC]
E – EIC => Earned Income Credit
W – W-2 => Withholding Taxes
Nonrefundable Credits:
(8) GRACEFUL
G – General Business Credit
R – Retirement Plan Contribution Credit
A – Adoption Credit
C – Child & Dependent Care Credit
E – Elderly or Disabled Credit
F – Foreign Tax Credit
U – Long-term Unused Minimum Tax Credit
L – Lifetime Learning Credit
General Business Credit
Included Credits:
11 [HOW-I-COMPARE]
H – Housing => Low-Income Housing Credit
O – Other Infrequent (on exam) credits
W –Welfare-to-work credit
I – Investment Credit
C – Childcare => Qualified Childcare Credit
O – Opportunity => Work Opportunity Credit (Expired 12/31/13)
M – Motor => Alternative Motor Vehicle Credit
P – Pension => Small Employer Pension Plan Start-Up Costs Credit
A – Alcohol Fuels Credit
R – Research => Increased Research Credit
E – Employer-Provided Childcare Credit
General Business Credit
• Formula
The credit may not exceed
“Net Income Tax†[NIT] ({Regular Tax + AMT} – NRTC – Other than AMT Credit)
Less: Greater of:
25% of Regular Tax Liability above $25,000
-OR-
“Tentative Minimum Tax’ for the year
• Unused Credit Carryover = Carry Back 1 year / Carry Forward 20 years
• It combines several nonrefundable tax credits and provides rules for their absorption against the taxpayer's liability.
• It is a combination of several tax credits to provide uniform rules for the current and carryback-carryover years
.