Overview of Other Tax Credits

Beyond the major credits covered in earlier sections (Child Tax Credit, EITC, Education Credits), several other tax credits can provide significant tax savings. For the EA exam, you need to understand the eligibility requirements, income limitations, and calculation methods for each of these credits.

---

Saver's Credit (Retirement Savings Contributions Credit)

The Saver's Credit (officially called the Retirement Savings Contributions Credit) rewards low-to-moderate income taxpayers for contributing to retirement accounts. It is claimed on Form 8880.

2024 Saver's Credit AGI Limits and Rates

The credit rate depends on AGI and filing status:

Maximum Credit Amounts

• Maximum contribution eligible: $2,000 per person ($4,000 for MFJ)
• Maximum credit: $1,000 per person ($2,000 for MFJ) at the 50% rate

Eligibility Requirements

To claim the Saver's Credit, you must meet ALL of the following:

1. Age 18 or older at the end of the tax year
2. Not a full-time student (enrolled for 5+ months during the year)
3. Not claimed as a dependent on another taxpayer's return
4. Made contributions to an eligible retirement plan (IRA, 401(k), 403(b), 457(b), SIMPLE, SEP, or ABLE account)

Qualified Retirement Contributions

EA Exam Tip: The Saver's Credit is nonrefundable—it can only reduce tax liability to zero. Beginning in 2027, it will be replaced by the "Saver's Match," which will deposit matching funds directly into retirement accounts.

---

Premium Tax Credit (PTC)

The Premium Tax Credit helps eligible taxpayers afford health insurance purchased through the Health Insurance Marketplace (healthcare.gov or state exchanges). It is reconciled on Form 8962.

How the PTC Works

The PTC is based on household income as a percentage of the Federal Poverty Level (FPL):

Income Eligibility (Through 2025)

Under the Inflation Reduction Act (IRA), which extended enhanced PTCs through 2025:

• Minimum: Household income at least 100% of FPL
• No Upper Limit: Through 2025, there is no upper income limit (previously 400% FPL)
• Premium Cap: Taxpayers pay no more than 8.5% of household income for the benchmark plan

Advance Payments vs. Reconciliation

Taxpayers can receive the PTC in two ways:

1. Advance Payment: Estimated credit paid directly to the insurance company monthly, reducing monthly premiums
2. At Filing: Full credit claimed when filing the tax return

Form 8962 Reconciliation: All taxpayers who received advance payments MUST file Form 8962 to reconcile the advance payments with the actual credit:

• If actual credit exceeds advance payments → Additional refundable credit
• If advance payments exceed actual credit → Must repay the excess (with some limitations)

Key PTC Rules

EA Exam Tip: If a taxpayer received advance PTC but fails to file a return, the IRS will eventually recover the advance payments.

---

Foreign Tax Credit

The Foreign Tax Credit (FTC) prevents double taxation when U.S. taxpayers pay income taxes to foreign countries. It is claimed on Form 1116 or directly on Schedule 3 for smaller amounts.

De Minimis Exception (No Form 1116 Required)

You can claim the FTC without Form 1116 if ALL of these apply:

• Foreign taxes are $300 or less ($600 if MFJ)
• All foreign income is passive income (dividends, interest, royalties)
• Foreign taxes are reported on a payee statement (Form 1099)
• You elect this simplified method

Credit Limitation

The FTC cannot exceed your U.S. tax on foreign-source income:

FTC Limit Formula:

FTC Limit = U.S. Tax x (Foreign-Source Taxable Income / Worldwide Taxable Income)

Carryback and Carryforward

Unused FTC can be:

• Carried back 1 year, then
• Carried forward 10 years

EA Exam Tip: The FTC is generally more beneficial than the foreign tax deduction because credits reduce tax dollar-for-dollar while deductions only reduce taxable income.

---

Adoption Credit

The Adoption Credit helps offset the costs of adopting a child. For 2024, it is claimed on Form 8839.

2024 Adoption Credit Limits

Credit Characteristics

• Nonrefundable credit for 2024
• 5-year carryforward for unused credit
• Special needs adoption: Can claim maximum credit even with no expenses

Qualified Adoption Expenses

• Reasonable adoption fees
• Court costs and attorney fees
• Travel expenses (including meals and lodging)
• Other expenses directly related to the legal adoption

Not Qualified: Expenses for adopting a spouse's child, surrogate parenting arrangements, or expenses reimbursed by employer programs.

---

Residential Clean Energy Credit

The Residential Clean Energy Credit (Section 25D) encourages homeowners to invest in renewable energy. It is claimed on Form 5695, Part I.

Credit Rate Schedule

Qualified Clean Energy Property

• Solar electric (photovoltaic) systems
• Solar water heating systems
• Wind energy systems (small residential)
• Geothermal heat pumps
• Fuel cells (up to $500 per 0.5 kW capacity)
• Battery storage technology (3 kWh or greater capacity)

Key Rules

• No dollar cap on the credit amount
• Primary or secondary residence (not rental property)
• New property only (not used equipment)
• Nonrefundable with unlimited carryforward
• Must reduce by subsidies/rebates from utilities

EA Exam Tip: Labor costs for installation qualify for the credit, but structural components (like roof trusses supporting solar panels) do not.

---

Clean Vehicle Credits

New Clean Vehicle Credit (Section 30D)

For new electric vehicles purchased in 2024:

Credit Structure: $3,750 for meeting critical mineral requirements + $3,750 for meeting battery component requirements.

Point-of-Sale Transfer: Starting in 2024, buyers can transfer the credit to the dealer for an immediate price reduction.

Used Clean Vehicle Credit (Section 25E)

For qualifying used EVs purchased in 2024:

Must be purchased from a registered dealer—private party sales do not qualify.

---

EA Exam Tips for Other Credits

1. Saver's Credit AGI limits are low—memorize the thresholds, especially the MFJ 50% rate at $46,000

2. PTC requires Form 8962 for anyone receiving advance payments—failure to file triggers repayment

3. Foreign Tax Credit has a de minimis exception at $300/$600—know when Form 1116 is NOT required

4. Adoption Credit is nonrefundable with 5-year carryforward; special needs adoptions get full credit regardless of expenses

5. Clean Energy Credit is 30% through 2032 with no dollar cap—know the qualified property types

6. EV Credits have strict MAGI and vehicle price limits—used vehicles have lower limits than new

7. All these credits have forms: Form 8880 (Saver's), Form 8962 (PTC), Form 1116 (FTC), Form 8839 (Adoption), Form 5695 (Clean Energy), Form 8936 (Clean Vehicles)