Category: North Carolina
North Carolina Credits
Credit for Charitable Contributions by Nonitemizers (Not Reported on Federal Schedule A)
If you claimed the standard deduction on your federal return, you may claim a tax credit for charitable contributions. You may not claim the credit if you claimed itemized deductions on your federal return. The allowable credit equals 7% of the amount by which your charitable contributions for the taxable year exceed 2% of your federal adjusted gross income. The credit may not be claimed for contributions for which credits for certain real property donations, gleaned crops, or recycling oyster shells are claimed. A part-year resident or nonresident may claim a prorated credit equal to the percentage of income that is subject to North Carolina tax. The credit may not exceed the tax liability for the tax year, reduced by other tax credits. To view the Worksheet for Determining Tax Credit for Charitable Contributions, please see the instructions for Form D-401.
Credit for Premiums Paid on Long-Term Care Insurance Contracts
If your adjusted gross income (Form 1040, Line 37; or Form 1040A, Line 21) is less than the following amounts for your filing status (Married filing jointly/qualifying widow(er) - $100,000; Head of household - $80,000; Single - $60,000; or Married filing separately - $50,000), a tax credit is allowed for the qualifying premiums you paid during the taxable year on a qualified long-term care insurance contract(s) (as defined in section 7702B of the Internal Revenue Code) that provides insurance coverage for yourself, your spouse, or a dependent for whom you are allowed to claim a personal exemption on your federal return. Medical insurance premiums that you pay for general health care, hospitalization, or disability insurance do not qualify as premiums paid for a long-term care insurance contract. A long-term care insurance contract is any insurance contract under which the only insurance protection provided is for coverage of qualified long-term care services as defined in section 7702B of the Internal Revenue Code. Qualified long-term care services are those services required by a chronically ill individual and provided under a plan of care prescribed by a licensed health care practitioner.
The credit is 15% of the premiums paid but may not exceed $350 for each qualified long-term care insurance contract for which a credit is claimed.
No credit is allowed for payments that are deducted from, or not included in, your federal gross income for the taxable year. For example, payments that are not included in federal gross income are premiums paid through an employer-sponsored plan in which the payments are excluded from taxable wages (pre-taxed dollars). If you claimed a deduction for medical expenses on Federal Schedule A, Line 4, or if you claimed a deduction for self-employed health insurance premiums on Federal Form 1040, Line 29, you are not entitled to claim this credit. However, you may claim this credit for any premiums paid for long-term care insurance that are not deductible on your federal return because of the age limitations contained in section 213(d)(10) of the Internal Revenue Code.
A part-year resident or nonresident is allowed the tax credit in the proportion that federal taxable income (as adjusted) is taxable to North Carolina. To view the Worksheet for Determining Tax Credit for Premiums Paid on Long-Term Care Insurance Contracts, please see the instructions for Form D-401.
Credit for Qualified Business Investments
A tax credit is allowed for qualifying investments in the equity securities or subordinated debt of a qualified business venture, qualified grantee business, or a qualified licensee business. The credit is 25% of the amount invested or $50,000, whichever is less. The tax credit is not allowed for the year in which the investment is made but is allowed for the taxable year beginning during the calendar year following the calendar year in which the investment was made. Any unused credit may be carried forward for the next succeeding five years. Your basis in the equity securities or subordinated debt acquired as a result of your investment must be reduced by the amount of allowable credit.
To be eligible for the credit, you must file Form D-499, Application for Tax Credit for Qualified Business Investments, with the Secretary of Revenue. The application should be filed on or before April 15 and no later than October 15 of the year following the calendar year in which the investment was made. An application filed after October 15 will not be accepted. See Page 2 of Form D–499 for additional rules and regulations for claiming the credit. The allowable credit should be shown on Form D-400TC, Line 24. You must attach a copy of the qualified business tax credit approval letter from the Department of Revenue to verify the credit claimed on the return.
Credit for Children
You may claim a child tax credit of $100 on your State return for each dependent child for whom you are entitled to claim a child tax credit on your federal return if your federal adjusted gross income (Form 1040, Line 37; or Form 1040A, Line 21) is less than the following amount shown for your filing status: Married filing jointly/qualifying widow(er) - $100,000; Head of household - $80,000; Single - $60,000; or Married filing separately - $50,000. The credit for children can be claimed only for a child who was under 17 years of age on the last day of the year. A nonresident or part-year resident is allowed the tax credit in the proportion that federal taxable income (as adjusted) is taxable to North Carolina.
Credit for Tax Paid to Another State or Country
When income is taxed by North Carolina for a period during which you were a legal resident of North Carolina and the same income is also taxed by another state or country because it was earned in or derived from sources within that state or country, a tax credit may be claimed, but not on the basis of a withholding statement alone. Note: Nonresidents are not entitled to this tax credit.
TaxSlayer will automatically calculate this credit for your Resident North Carolina return when you add your Nonresident return to your account. If you have a Part-Year North Carolina return, you will be required to enter the information asked of you within your account.
Credit for Small Businesses That Pay NC Unemployment Insurance
A tax credit is allowed for small businesses that make contributions to the State Unemployment Insurance Fund during the tax year with respect to wages paid for employment in this State. The credit is 25% of the amount of qualified contributions to the State Unemployment Insurance Fund. A small business is defined as a business whose cumulative gross receipts from the business activity for the tax year do not exceed one million dollars. The credit may be claimed only against corporate and individual income taxes. If the credit exceeds the amount of tax for the taxable year reduced by the sum of all credits allowable, the excess is refundable. The credit applies to taxable years 2010 and 2011.
Credit for Children With Disabilities Who Require Special Education
Certain taxpayers are allowed a tax credit of up to $3,000 per semester for tuition paid for an eligible dependent child. An eligible dependent child must be a resident of North Carolina and enrolled in kindergarten through 12 in a nonpublic school or in a public school at which tuition is charged in accordance with G.S. 115C-366.1.