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Flashcards in Business Tax Credits Deck (10)
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How is the proportion of US tax allocable to foreign source income computed?

US tax x (foreign taxable income / worldwide taxable income).


What is the credit limit of foreign tax credit?

Lower of the foreign tax paid or the proportion of US tax allocable to foreign source income.


What happens to excess credits?

Carry back 1 yr, forward 10 yrs.


Wordwide taxable income: 300,000.
US source taxable income: 180,000.
US income tax before foreign tax credit: 96,000.
Foreign source taxable income: 120,000.
Foreign income taxes paid on foreign source taxable income: 39,000.
What amount of foreign tax credit may be claimed?

Lower of:
*96,000 x (120,000/300,000)=38,400.

Therefore, $38,400.


General business credit: what is the limit re: regular tax liability amount?

The business credit can't offset all of the reular tax if the liability exceeds $25,000.


General business credit: what happens to unused credit?

Carried back 1 yr, forward 20 yrs.


General business credit: what is eligible for research credit and how much? Criteria? What are things that are NOT eligible?

Incremental research expenditures are eligible for a 20% credit.
Research must be conducted within the US.
Not: commercial production, surveys, social science research.


General business credit: what is the formula for alternative simplified research credit?

Equal to 14% of the excess of qualified research expenses over 50% of the average research expenses for the last 3 yrs.


General business credit: what is WOTC? What is the credit based on? How is the credit computed? Maximum credit? Impact on deduction for wages?

*Work opportunity tax credit - by hiring people from certain category such as veterans.
*Calculated on the amount of wages paid per eligible employee during the first year of employment.
*Credit: 40% of qualified wages.
*Max: $2,400.
*Reduces the deduction for wages.


General business credit: how much is small business health care tax credit? Who is eligible employer? Which business type is eligible?

*50% of non-elective health insurance premiums.

*who has less than 25 full-time equivalent employees whose average annual wages is less than a statutory amount (2017: $52,400).
*employer must pay at least 50% of premiums.

*Any type, even sole proprietorship