Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 31

Other Tax Credits

Some tax credits, such as the Child and Dependent Care Credit (Chapter 28) and the Lifetime Learning Credit (Chapter 30), are nonrefundable and cannot exceed a taxpayer's tax liability. In most cases, the portion of a nonrefundable tax credit that exceeds a taxpayer's tax liability is lost forever; only some credits have a carryforward.

Other credits, such as the Earned Income Credit (Chapter 27) and the American Opportunity Credit (Chapter 30), are wholly or partially refundable. They can be used to offset tax. If they exceed the tax, the excess is refunded to the taxpayer.

In addition to the tax credits explained in Chapters 27 through 30, there are a number of other tax credits for individuals. This chapter explains nonrefundable and refundable tax credits not covered in prior chapters. Nonrefundable credits include the credit for qualified retirement savings contributions (Saver's Credit), residential energy efficient property credit, alternative motor vehicle credit, the credit for the elderly or disabled, the foreign tax credit, and the mortgage interest credit. For 2012, the Health Coverage Tax Credit is refundable.

The minimum tax credit, which relates to the alternative minimum tax, is discussed in Chapter 33.

Credit for Qualified Retirement Savings Contributions (Saver's Credit)

The credit for qualified retirement savings contributions, often referred to as the Saver's Credit, is designed to encourage lower-income taxpayers to contribute ...