Information You'll Need: Your filing status Whether you can claim the child as a dependent The child's date of birth Can a noncustodial parent claim the child tax credit for his or her child? The noncustodial parent can claim the child tax credit for a child only if he or she is allowed to claim the child’s dependency exemption and meets the requirements for claiming the child tax credit. The noncustodial parent must also attach to his or her return a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, signed by the custodial parent. For information on who qualifies for the credit, taxpayer identification number requirements, and how to calculate the credit, see the Instructions for Form 1040 or Instructions for Form 1040A, U.S. Individual Income Tax Return. Can I claim both the child tax credit and the child and dependent care credit? You can claim both the child tax credit and the child and dependent care credit on the same return if you qualify for both credits. If you qualify for one or both credits, you can claim the credits on Form 1040, Form 1040A, U.S. Individual Income Tax Return, or Form 1040NR, U.S. Nonresident Alien Income Tax Return. In addition, to claim the dependent care credit, you must complete Form 2441, Child and Dependent Care Expenses. The Instructions for Form 1040 and the Instructions for Form 1040A explain who qualifies for the child tax credit, taxpayer identification number requirements, and how to calculate the credit. • If you are claiming the child tax credit for a dependent child who has an ITIN, complete Part I of Schedule 8812 (Form 1040A or 1040), Child Tax Credit, and attach it to your Form 1040, 1040A, or 1040NR. If you are claiming the additional child tax credit, complete Parts II - IV of Schedule 8812 (Form 1040A or 1040). The Instructions for Form 2441 explain who qualifies for the dependent care credit and how to calculate it.

You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. You may not take this credit if your filing status is married filing separately. The amount of the credit is a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income. Dollar Limit The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual's well-being and protection. If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you. Qualifying Individual A qualifying individual for the child and dependent care credit is: Your dependent qualifying child who is under age 13 when the care is provided Your spouse who is physically or mentally incapable of self-care and lived with you for more than half of the year, or An individual who is physically or mentally incapable of self-care, lived with you for more than half of the year, and either: is your dependent; or could have been your dependent except that he or she has gross income that equals or exceeds the exemption amount, or files a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2015 return. Physically or Mentally Not Able to Care for Oneself - An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs, or requires the full-time attention of another person for the individual's own safety or the safety of others. Children of Divorced or Separated Parents or Parents Living Apart - A noncustodial parent who is claiming a child as a dependent should review the rules under the topic Child of divorced or separated parents or parents living apart in Publication 503, Child and Dependent Care Expenses, because a child may be treated as the qualifying individual of the custodial parent for the child and dependent care credit, even if the noncustodial parent is entitled to claim the dependency exemption for the child. Individual Qualifying for Part of Year - If an individual is a qualifying individual for only a part of the tax year, only those expenses paid for care of the individual during that part of the year are included in calculating the credit. Taxpayer Identification Number - You must provide the taxpayer identification number (usually the social security number) of each qualifying individual. Care of a Qualifying Individual The care may be provided in the household or outside the household; however, do not include any amounts that are not primarily for the well-being of the individual. You should divide the expenses between amounts that are primarily for the care of the individual and amounts that are not primarily for the care of the individual. You must reduce the expenses primarily for the care of the individual by the amount of any dependent care benefits provided by your employer that you exclude from gross income. In general, you can exclude up to $5,000 for dependent care benefits received from your employer. Additionally, in general, the expenses claimed may not exceed the smaller of your earned income or your spouse’s earned income; however, a special rule applies if your spouse is a full-time student or incapable of self-care. Care Providers You must identify all persons or organizations that provide care for your child or dependent. You must report the name, address, and taxpayer identification number (either the social security number or the employer identification number) of the care provider on your return. If the care provider is a tax-exempt organization, you need only report the name and address of the organization on your return. You can use Form W-10 (PDF), Dependent Care Provider's Identification and Certification, to request this information from the care provider. If you cannot provide information regarding the care provider, you may still be eligible for the credit if you can show that you exercised due diligence in attempting to provide the required information. If you pay a provider to care for your dependent or spouse in your home, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare taxes and pay federal unemployment tax. For more information, refer to Employment Taxes for Household Employers in Publication 503, Publication 926, Household Employer's Tax Guide, or Topic 756. Payments to Relatives or Dependents - The care provider cannot be your spouse, the parent of your qualifying individual, your child who is under the age of 19, or a dependent for whom you or your spouse may claim an exemption on your return. Reporting on Your Tax Return If you qualify for the credit, complete Form 2441 (PDF), Child and Dependent Care Expenses, and Form 1040 (PDF) or Form 1040A (PDF), U.S. Individual Income Tax Return, or Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. If you received dependent care benefits from your employer (an amount is shown on your Form W-2 (PDF), Wage and Tax Statement), you must complete Part III of Form 2441. You cannot claim the child and dependent care credit if you use Form 1040EZ (PDF), Income Tax Return for Single and Joint Filers With No Dependents.

A credit for taxpayers: aged 65 or older OR retired on permanent and total disability and received taxable disability income for the tax year; AND with an adjusted gross income OR the total of nontaxable Social Security, pensions annuities or disability income under specific limits The credit ranges between $3,750 and $7,500.

Lifetime Learning Credit at a Glance A credit for up to $2,000 per year to pay for qualified tuition and required enrollment fees at an eligible educational institution for you, your spouse or a dependent, if your modified adjusted gross income (MAGI) is $65,000 or less ($130,000 or less for married filing jointly). You cannot claim this credit for a student, if you claimed the American Opportunity Tax Credit for that student. The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses--including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return. Who can claim the LLC? To claim a LLC, you must meet all three of the following: You, your dependent or a third party pay qualified education expenses for higher education You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution The eligible student is yourself, your spouse or a dependent you listed on your tax return American Opportunity Tax Credit at a Glance Español A credit for tuition, required enrollment fees and course material for the first four years of post-secondary education for up to $2,500 per eligible student per year. Your modified adjusted gross income (MAGI) must be under $90,000 ($180,000 for joint filers) and you must not have claimed the AOTC or the former Hope Credit for more than four tax years for the same eligible student. Forty percent of this credit may be refundable. American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. Who is an eligible student for AOTC? To be eligible for AOTC, the student must: Be pursuing a degree or other recognized education credential Be enrolled at least half time for at least one academic period* beginning in the tax year Not have finished the first four years of higher education at the beginning of the tax year Not have claimed the AOTC or the former Hope credit for more than four tax years Not have a felony drug conviction at the end of the tax year *Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. The schools determine the academic periods. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period. What are the income limits for AOTC? To claim the full credit, your MAGI (modified adjusted gross income) must be $80,000 or less ($160,000 or less for married filing jointly). You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly) You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers). MAGI for most people is the amount of AGI, adjusted gross income, shown on your tax return. On Form 1040A, AGI is on line 22 and is the same as MAGI. If you file Form 1040, you add the following amounts to AGI (line 38): Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, or of Puerto Rico.

You, your spouse and any qualifying child you list on your tax return must each have a Social Security number that is valid for employment. Filing Status You must file: Married filing jointly Head of household Qualifying widow(er) Single You can't claim EITC if your filing status is married filing separately. If you, or your spouse, are a nonresident alien, see Publication 519, U.S. Tax Guide for Aliens, to find out if you are eligible for EITC. Income Earned During 2015 Your tax year investment income must be $3,400 or less for the year. Must not file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion. Your total earned income must be at least $1. Both your earned income and adjusted gross income (AGI) must be no more than: Filing Status Qualifying Children Claimed Zero One Two Three or more Single Head of Household or Surviving Spouse $14,820 $39,131 $44,454 $47,747 Married Filing Jointly $20,330 $44,651 $49,974 $53,267

Mortgage Interest Credit at a Glance The mortgage interest credit helps lower-income individuals afford home ownership. You must contact the appropriate government agency about acquiring a Mortgage Credit Certificate (MCC) before getting a mortgage or buying a home. If you itemize your deductions, you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit you claim. Residential Energy Efficient Property Credit (Section 25D) at a Glance A credit of 30 percent of the expenditures made by a taxpayer during the taxable year for: qualified solar electric systems; qualified solar water heaters; qualified fuel cell property; qualified small wind energy property; and qualified geothermal heat pumps. The credit for expenditures made for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property; the amounts of the other qualified expenditures eligible for the credit are not limited. In addition, this credit may be carried over if it exceeds the limitation imposed by section 26(a). The credit is available for property placed in service through Dec. 31, 2016. The credit for solar electric property and solar water heating property is extended for property placed in service through December 31, 2021, at applicable percentages as described in the statute. Nonbusiness Energy Property Credit (Section 25C) at a Glance A credit of 10 percent of the cost of qualified energy-efficient improvements. Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. The cost of installing these items is not included in the credit calculation. Additionally, a credit is available, including the costs of installation, for certain high-efficiency heating and air-conditioning systems, as well as highefficiency water heaters and stoves that burn biomass fuel. There is a lifetime limitation of $500, of which only $200 may be used for windows. Qualifying improvements must have been placed in service in the taxpayer's principal residence located in the United States through Dec. 31, 2016. Low-Income Housing Credit at a Glance A credit for owners of residential low-income rental buildings satisfying specified conditions that can be taken over a 10-year credit period. The state housing credit agency (Agency) providing credits completes Part I of Form 8609 Low-Income Housing Credit Allocation and Certification (PDF), for each building and attaches a copy of each completed Form 8609 to the Form 8610, Annual Low-Income Housing Credit Agencies Report (PDF), which are then filed with the Low-Income Housing Credit (LIHC) unit at the Philadelphia campus. The original of the Form 8609 is sent by the Agency to the building owner, who submits the original to the LIHC unit by the due date (including extensions) of the first tax return the owner files Form 8609-A, Annual Statement for Low-Income Housing Credit (PDF).

Health Care Premium Tax Credit & Health Coverage Tax Credit Who Qualifies You are eligible for the premium tax credit if you meet all of the following requirements: Have household income that falls within a certain range. Do not file a Married Filing Separately tax return o Unless you meet the criteria in the regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using Married Filing Separately Cannot be claimed as a dependent by another person. In the same month – a coverage month – you, or a family member: Enroll in coverage through a Health Insurance Marketplace Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value. Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE. Pay the share of premiums not covered by advance credit payments For more information about these eligibility requirements see Eligibility for the Premium Tax Credit. During enrollment through the Marketplace, the Marketplace will determine if you are eligible for advance payments of the premium tax credit, also called advance credit payments. Advance credit payments are amounts paid directly to your insurance company on your behalf to lower the out of pocket cost for your health insurance premiums. Health Coverage Tax Credit The Health Coverage Tax Credit is a tax credit that pays 72.5 percent of qualified health insurance premiums for eligible individuals and their families. The HCTC acts as partial reimbursement for premiums paid for qualified health insurance coverage and can now be claimed for qualified coverage through 2019. Eligibility You may be eligible to elect the HCTC only if you are one of the following: An eligible trade adjustment assistance recipient, alternative TAA recipient or reemployment TAA recipient, An eligible Pension Benefit Guaranty Corporation payee, or The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC payee who is deceased or who finalized a divorce with you. You are not eligible for the HCTC if you: Can be claimed as a dependent on another person’s federal income tax return or Are enrolled in Medicare, Medicaid, the Children’s Health Insurance Program, or the Federal Employees Health Benefits Program or are eligible to receive benefits under the U.S. military health system (TRICARE) Qualifying Health Insurance Coverage The HCTC program does not provide health insurance coverage. You will need to have or obtain qualified health insurance coverage. All plans that were qualified for the HCTC in 2013 qualify for the HCTC through 2019. This includes COBRA or spousal coverage if the employer, or former employer, did not pay 50 percent or more of the cost of coverage. Individual (private and non-group) health insurance that you purchase for yourself or your family from an insurance company, agent, or broker are also included. A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC for 2016 and 2017. If you are eligible to claim the Health Coverage Tax Credit and enrolled in Marketplace coverage for 2016 and 2017, see our questions and answers about qualifying coverage for more information.

If you are an employee, you may be able to deduct your work-related expenses as an itemized deduction (subject to limitations) on Form 1040, Schedule A (PDF), Itemized Deductions. Additional information on this subject can be found in the Form 1040, Schedule A Instructions (PDF). Also, you may refer to Topic 511 for additional information on business travel expenses. Although commuting costs are not deductible, some local transportation expenses are. Deductible local transportation expenses include the ordinary and necessary expenses of going from one workplace (away from the residence) to another. If you have an office in your home that you use as your principal place of business for your employer, you may deduct the cost of traveling between your home office and work places associated with your employment. Refer to Topic 509 for information on home offices. You may deduct the cost of going between your residence and a temporary work location outside of the metropolitan area where you live and normally work. If you have one or more regular work locations away from your residence, you may also deduct the cost of going between your residence and a temporary work location in the same trade or business within your metropolitan area. For information on transportation expenses related to your car, refer to Topic 510. Business entertainment expenses and business gift expenses may be deductible but subject to certain limits. For information on business entertainment expenses, refer to Topic 512. For additional information on business expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. You must keep records to prove the expenses you deduct. For general information on recordkeeping, refer to Topic 305. If your employer reimbursed you or gave you an advance or allowance for your employee business expenses that is treated as paid under an accountable plan, the payment should not appear as income on your Form W-2 (PDF), Wage and Tax Statement. You do not include the payment in your income, and you may not deduct any of the reimbursed amounts. To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules: 1. You must have paid or incurred expenses that are deductible while performing services as an employee 2. You must adequately account to your employer for these expenses within a reasonable time period, and 3. You must return any excess reimbursement or allowance within a reasonable time period These rules are discussed in greater detail in Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Requirements to Claim the Deduction Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction: 1. Regular and Exclusive Use. You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room. 2. Principal Place of Your Business. You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers. Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities. Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home.

Some deductible expenses while traveling away from home include the costs of travel between your home and your business destination, using your car while at your business destination, fares for taxis or other types of transportation, meals, lodging, tips, dry cleaning and business calls while on Standard Mileage Rates at a Glance Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be: 57.5 cents per mile for business miles driven, up from 56 cents in 2014 23 cents per mile driven for medical or moving purposes, down half a cent from 2014 14 cents per mile driven in service of charitable organizations

Generally, 50 percent of meal and entertainment expenses are allowed as a deduction, and you must have records to prove the business purpose.

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities. For tax years beginning in 2014 or later, there are changes to the credit: The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers. To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement. The credit is available to eligible employers for two consecutive taxable years. If you pay $50,000 a year toward employees’ health care premiums — and if you qualify for a 15 percent credit, you save... $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year. Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments. There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. Refund payments issued to small tax-exempt employers claiming the refundable portion of credit are subject to sequestration. Find out more information on sequestration. Note that the Congressional Budget Office estimates that a sequestration for fiscal year 2016 will not be required. If you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return. Refund limitations may apply. Generally, a claim for refund must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.

Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks. For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500. The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009).

Credit per Unit Produced Based on Energy Efficiency The credit may be claimed on each qualifying appliance produced by the taxpayer and is based on the type of appliance, its energy efficiency, and for dishwashers and clothes washers, the amount of water it consumes. The total credit for any type of qualifying appliance is the applicable amount listed below multiplied by the eligible production for such type. §45M(a)(2). For purposes of this code section, the term “produced” includes manufactured. §45M(f)(7). Dishwashers $25 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(C) $50 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 295 kilowatt hours per year and 4.25 gallons per cycle (4.75 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(D) $75 in the case of a dishwasher which is manufactured in calendar year 2011 and which uses no more than 280 kilowatt hours per year and 4 gallons per cycle (4.5 gallons per cycle for dishwashers designed for greater than 12 place settings). §45M(b)(1)(E) The term “dishwasher” means a residential dishwasher subject to the energy conservation standards established by the Department of Energy. §45M(f)(2) Clothes washers $175 in the case of a top-loading clothes washer manufactured in calendar year 2011 which meets or exceeds a 2.2 modified energy factor and does not exceed a 4.5 water consumption factor. §45M(b)(2)(E) $225 in the case of a clothes washer manufactured in calendar year 2011—(i) which is a top-loading clothes washer and which meets or exceeds a 2.4 modified energy factor and does not exceed a 4.2 water consumption factor, or (ii) which is a front-loading clothes washer and which meets or exceeds a 2.8 modified energy factor and does not exceed a 3.5 water consumption factor. §45M(b)(2)(F) The term “clothes washer” means a residential model clothes washer, including a commercial residential style coin operated washer. I.R.C. §45M(f)(3). The term “top-loading clothes washer” means a clothes washer that has the clothes container compartment access located on the top of the machine and that operates on a vertical axis. §45M(f)(4) Refrigerators The credit for refrigerators is based on their energy savings relative to the energy conservation standards promulgated by the Department of Energy that took effect on July 1, 2001. §45M(f)(8) $150 in the case of a refrigerator manufactured in calendar year 2011 which consumes at least 30% less energy than the 2001 energy conservation standards. §45M(b)(3)(E) $200 in the case of a refrigerator manufactured in calendar year 2011 which consumes at least 35% less energy than the 2001 energy conservation standards. §45M(b)(3)(F) The term “refrigerator” means a residential model automatic defrost refrigerator-freezer that has an internal volume of at least 16.5 cubic feet. §45M(f)(5) Eligible Production The production in a calendar year eligible for the credit includes only the excess of the number of appliances of such type that are produced during such calendar year in the United States over the average number of appliances of such type that were produced by the taxpayer (or any predecessor) in the United States during the preceding 2-calendar year period. §45M(c) Limitations The following limitations on the credit apply to taxable years beginning after December 31, 2010 Dollar Limitation The aggregate amount of credit allowed with respect to a taxpayer for any taxable year shall not exceed $25 million reduced by the amount of the credit allowed to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2010. §45M(e)(1). The $25 million dollar limitation shall not be taken into account for refrigerators eligible for the $200 credit and clothes washers eligible for the $225 credit. §45M(e)(2) 4% Gross Receipts Limitation The credit with respect to a taxpayer for the taxable year shall not exceed an amount equal to 4% of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined. §45M(e)(3) For purposes of the 4% gross receipts limitation: All controlled groups of corporations, and partnerships or proprietorships that are under common control, that are treated as a single employer under §52(a) or (b) are also treated as a single producer for gross receipts limitation purposes. §45M(e)(4) & §448(c)(2) If the entity was not in existence for the entire preceding 3 taxable years, the percentage of average annual gross receipts are to be applied on the basis of the period during which such entity was in existence. §45M(e)(4) & §448(c)(3)(A) Gross receipts for any taxable year of less than 12 months are to be annualized by multiplying the gross receipts for the short period by 12 and dividing the result by the number of months in the short period. §45M(e)(4) & §448(c)(3)(B) Gross receipts for any taxable year are to be reduced by returns and allowances made during such year. §45M(e)(4) & §448(c)(3)(C) The preceding 3 year period includes gross receipts of the taxpayer or any predecessor to the taxpayer. §45M(e)(4) & §448(c)(3)(D) Definition of Controlled Group Generally, controlled groups of corporations, and partnerships or proprietorships which are under common control that are treated as single employers under §52(a) or (b) are treated as single producers for purposes of the credit. §45M(g)(2)(A). Foreign corporations are not considered excluded members of a controlled group of corporations. §45M(g)(2)(B) Verification No amount of credit will be allowed with respect to which a taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines to be necessary. I.R.C. §45M(g)(3) Carryback and Carryforward Rules While Code §39 generally provides for a 1 year carryback and 20 year carryforward for current year business credits that exceed the limitation of Code §38(c), no portion of the unused business credit can be carried back to a tax year before the first year for which that credit is allowed. §§39(a) & (d) Effective Date Act Sec. 709 applies to qualifying energy efficient appliances produced after December 31, 2010.

A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for expenditures in machinery and equipment by corporations that have no more than 800 full-time, permanent employees in Connecticut. The tax credit is based on a percentage of the amount spent on machinery and equipment acquired for and installed in a facility in Connecticut that exceeds the amount spent for such machinery and equipment in the preceding income year.

A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes by corporations that employ apprentices who are receiving training in the manufacturing, plastics, plastics-related, or construction trades. Wages of pre-apprentices are not eligible for this tax credit. Manufacturing Trades Corporations claiming this tax credit must have a qualified apprenticeship training program that is: Certified in accordance with regulations adopted by the Connecticut Department of Labor (DOL); and Registered with the Connecticut State Apprenticeship Council. Examples of trades eligible for this tax credit include: Mechanist; Toolmakers; Tool and Diemaker; Tool and Machine Setter; and Machine Tool Repairer. Plastics and Plastics-Related Trades Corporations claiming this credit must have a qualified apprenticeship training program that is: Certified in accordance with regulations adopted by DOL; and Registered with the Connecticut State Apprenticeship Council. Most apprenticeship programs in the plastic and plastics-related trades qualify for the tax credit available for the manufacturing trades because there is some overlap between the two trades. Construction Trades Corporations claiming this tax credit must have a registered apprenticeship training program that is: At least four years in duration; Certified in accordance with regulations adopted by DOL; and Registered with the Connecticut State Apprenticeship Council.

A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for expenditures made by a corporation for human capital investment. Definitions Human capital investment means: In-state job training of persons employed in Connecticut; Work education programs in Connecticut; Worker training and education of persons employed in Connecticut provided by Connecticut institutions of higher education; Donations or capital contributions to institutions of higher education in Connecticut for improvements or advancement of technology, including physical plant improvements; Planning, sit preparation, construction, renovation, or acquisition of facilities in Connecticut for the purpose of establishing a day care facility to be used primarily by the children of employees who are employed in Connecticut; Child care subsidies paid to employees employed in Connecticut for child care provided in Connecticut; or Contributions made to the Individual Development Account Reserve Fund administered by the Connecticut Department of Labor. Training is the instruction, maintenance, or improvement of the skills required by the employer for the proper performance of the employee’s duties that are conducted in Connecticut. Work education programs include but are not limited to programs in public high schools and work education-diversified occupation programs. Expenditures associated with the “in-state job training of persons employed in Connecticut” include: Training materials; Direct expenses relating to training (e.g., the cost of a training instructor); Course registration fees; and Travel costs related to training, provided the travel is within Connecticut. However, salaries, payroll taxes and fringe benefits earned by employees during training are not expenditures eligible for this tax credit. Tax Credit Amount The tax credit is equal to 5% of the amount paid or incurred by the corporation for a human capital investment. No corporation claiming this tax credit shall claim any other credit against any tax with respect to the same investment. Carryforward and Carryback Limitations Any tax credit not used during the income year may be carried forward to the next five succeeding income years until the entire credit is used. No carryback is allowed.

A tax credit may be applied against the tax imposed under Chapter 208 of the Connecticut General Statutes for research and development expenses incurred in Connecticut. Definitions Qualified small business means a company that has gross income for the previous income year that does not exceed $100 million and has not met the gross income test through transactions with a related person, as defined for purposes of the fixed capital investment credit. Research and development expenses mean those expenses that may be deducted under IRC §174, as in effect on May 28, 1993, and basic research payments as defined under IRC §41, provided the expenditures and payments are: Paid or incurred for the research and experimentation and basic research conducted in Connecticut; and Not funded, as provided in IRC §41(d)(4)(H), by any grant, contract, or otherwise by a person or governmental entity other than the taxpayer unless the other person is included in a combined return with the person paying or incurring such expenses. Research and development expenses may include but are not limited to: Expenditures incurred in connection with the taxpayer’s trade or business represent research and development costs in the experimental or laboratory sense; All costs incident to the development or improvement of a product including any pilot, model, process, formula, invention, technique, patent, or similar property. The product can be used by the corporation in its trade or business or can be held for sale, lease, or license; or Costs of obtaining a patent, such as attorneys’ fees expended in making and perfecting a patent application. The following are examples of IRC §174 expenses that do not qualify: Overhead and other expenses, such as general and administrative expenses, that relate to a corporation’s activities as a whole and do not contribute directly to the research and development effort; or The ordinary testing or inspection of materials or products for quality control, for efficiency surveys, management studies, consumer surveys, advertising or promotions, for research in connection with literary, historical, or similar projects, and the costs of acquiring another’s patent, model, production, or process. Tax Credit Amount A qualified small business is entitled to a tentative tax credit equal to 6% of its research and development expenses. All other companies calculate their tax credit as provided in the chart below: Research and Development Expenses Tentative Tax Credit Percentage $50 million or less 1% More than $50 million but not more than $100 million $500,000 + 2% over $50 million More than $100 million but not more than $200 million $1,500,000 + 4% over $100 million More than $200 million $5,500,000 + 6% over $200 million If it results in a greater tentative tax credit, companies headquartered in an Enterprise Zone, with revenues in excess of $3 billion, employing more than 2,500 employees, shall multiply their research and development expenses by 3.5% instead of using the tax credit percentage listed above.

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 54 cents per mile for business miles driven, down from 57.5 cents for 2015 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015 14 cents per mile driven in service of charitable organizations The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51. Notice 2016-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

What Can I Deduct? To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. It is important to separate business expenses from the following expenses: The expenses used to figure the cost of goods sold, Capital Expenses, and Personal Expenses. Cost of Goods Sold If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. The following are types of expenses that go into figuring the cost of goods sold. The cost of products or raw materials, including freight Storage Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products Factory overhead Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs. This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million. For additional information, refer to the chapter on Cost of Goods Sold, Publication 334, Tax Guide for Small Businesses and the chapter on Inventories, Publication 538, Accounting Periods and Methods. Capital Expenses You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize. Business start-up costs (See the note below) Business assets Improvements Note: You can elect to deduct or amortize certain business start-up costs. Refer to chapters 7 and 8 of Publication 535, Business Expenses. Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part. For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Refer to chapter 4 of Publication 535, Business Expenses, for information on deducting interest and the allocation rules. Business Use of Your Home If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information. Business Use of Your Car If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year mileage rates see the Standard Mileage Rates. Other Types of Business Expenses Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business. Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement. Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible. Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities. Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the percentage of your home devoted to your business activities, utilities, repairs, and depreciation.

You generally can't deduct in one year the entire cost of property you acquired, produced, or improved and placed in service for use either in your trade or business or to produce income if the property is a capital expenditure. Instead, you generally must depreciate such property. Depreciation is the recovery of the cost of the property over a number of years. You deduct a part of the cost every year until you fully recover its cost. You may be able to elect under section 179 to recover all or part of the cost of qualifying property up to a limit, by deducting it in the year you place the qualifying property in service. For more information, refer to Publication 946, How to Depreciate Property. Depreciable or Not Depreciable The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture. You can't claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, you can depreciate only the business or investment use portion. Land is never depreciable, although buildings and certain land improvements may be. You may depreciate property that meets all five of the following tests: It must be property you own. It must be used in a business or income-producing activity. It must have a determinable useful life. It must be expected to last more than one year. It must not be excepted property. Excepted property (as described in Publication 946, How to Depreciate Property) includes certain intangible property, certain term interests, and property placed in service and disposed of in the same year.