Term
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Definition
| Adoption credit is a non-refundable credit for qualified adoption expenses incurred for each eligible child. The credit cannot exceed $12,150 per child (for 2009). The limit is a per child limit, not an annual limit, and can be carried forward for up to five years or until used. |
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Term
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Definition
| Cafeteria plan ia a plan wherein an employer offers a choice of nontaxable fringe benefits from which participating employees may select. The plan may be funded with employer contributions, employee contributions (usually through salary reduction agreements) or a combination of both. It is also often called a 125 plan or a flexible spending account (FSA). |
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Term
| Explain child and dependent care credit? |
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Definition
| Child and dependent care credit is a non-refundable tax credit of 20-35% of employment related child and dependent care expenses for amounts of up to $6,000, available to individuals who are employed and have a qualifying child or disabled spouse or dependent. The credit is computed on Form 2441 for Form 1040 and 1040a filers. |
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Term
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Definition
| Credits are reductions of tax liability allowed for various purposes to taxpayers who meet the qualifications. Some credits are refundable; that is, the IRS will send the taxpayer a refund for any amount in excess of the tax liability. Some credits are nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be carried to other tax years. |
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Term
| Explain nonrefundable credit? |
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Definition
| A nonrefundable credit is a credit which cannot exceed the taxpayer's tax liability. |
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Term
| Explain refundable credit? |
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Definition
| A refundable credit is a credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability. |
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Term
| Explain retirement savings contributions credit (Saver's Credit)? |
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Definition
| A saver's credit is a nonrefundable credit based on up to $2,000 in contributions to qualified retirement plans and traditional and Roth IRAs. The credit is allowed in addition to any deduction available for the contributions. The credit is completed on Form 8880. |
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Term
| Explain special-needs child? |
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Definition
| For the adoption credit, a special-needs child is a child determined by the state to be difficult to adopt due to factors such as racial or ethnic background, age, a condition that requires special care, or whether the child has siblings. A special-needs child must be a US citizen. |
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