Vermont Tax Schedule IN-112 - Tax Adjustments and Credits Instructions

General Informations

Print your name and social security number on this schedule. Use blue or black ink to make all entries.

VT Calculation A Adjustments to Income or VT Tax

Part I Income from State and Local Obligations

INTEREST AND DIVIDEND INCOME FROM NON-VT STATE AND LOCAL OBLIGATIONS ARE TAXABLE IN VT. A VT obligation is one from the State of VT or a VT municipality.

Line 1

Enter the total interest and dividend income received from all state and local obligations exempted from Federal tax.

Line 2

Enter the interest and dividend income from VT obligations. This may have been paid directly to you or through a mutual fund or other legal entity that invests in VT state and local obligations. If you receive this income from a mutual fund that has only a portion of its assets invested in VT state and local obligations, enter only the VT obligation amount.

Line 3

Subtract Line 2 from Line 1. Enter result here and also on Form IN-111, Section 3, Line 12a. This is the amount of interest and dividend income from non-VT state and local obligations that must be included in VT Taxable Income.

Part II Adjustments to VT Income Tax

Additions to VT Tax

Line 4

Tax on Qualified Plans and tax favored accounts, including IRA, HSA and MSA.

Line 5

Recapture of Federal Investment Tax Credit from Federal Form 4255.

Line 6

Tax on lump sum distributions from Federal Form 4972.

Line 7

Add Lines 4 through 6 and enter result.

Line 8

Multiply Line 7 by 24% and enter result.

Line 9

Recapture of Vermont tax credit(s). Contact the Department at 1-866-828-2865 (toll-free in VT) or 802-828-2865 (local or out-of-state) for information on calculating the recapture amount.

Line 10

Add Lines 8 and 9. Enter result here and on Form IN-111, Section 4, Line 17.

Subtractions from VT Tax

Line 11

Credit for Child and Dependent Care Expenses from Federal Form 1040, Line 48; 1040A, Line 29. Do not use this line if you qualify for the Low Income Child and Dependent Care Credit. See instructions on page 9. If the Federal tax credit is based on care provided by accredited and nonaccredited providers, complete the Low Income Child & Dependent Care Worksheet on page 9 to determine if the Low Income credit or 24% of the total Federal tax credit is more beneficial to you. You cannot take both credits.

Line 12

Credit for the Elderly or the Disabled from Federal Form 1040, Line 49 or 1040A, Line 30.

Line 13

Investment Tax Credit as defined by IRS Section 46 and claimed on Federal Form 3468.

Line 14

 VT Farm Income Averaging Credit This credit is available to farmers who calculate Federal tax using Federal Schedule J. Complete the worksheet below.

VT FARM INCOME AVERAGING WORKSHEET

1. Calculate and enter here Federal income tax using Federal Schedule D, Federal Schedule D Worksheet, or Federal tax rate schedules as if Schedule J was not used.	$_____
2. Enter Federal tax from Federal Schedule J Line 22	$_____
3. Subtract Line 2 from Line 1. This is your VT Farm Income Averaging Credit. Enter the result on Schedule IN-112, Part II, Line 14	$_____

Line 15

Add Lines 11 through 14.

Line 16

Multiply Line 15 by 24% and enter result.

Line 17

Solar Energy Investment Credit (For Federal solar energy investment tax credit authorized by Section 48 of the Internal Revenue Code) The solar energy investment included on Line 13 receives a VT credit equal to 24% of the entire investment credit. Beginning with tax year 2008, VT allows a tax credit equal to 100% of the Federal credit for solar energy investment in VT. Enter only the remaining 76% of the Federal solar energy investment credit in VT on this line.

Line 18

Add Lines 16 and 17. Enter result here and on Form IN-111, Section 4, Line 19.

VT Calculation B Credit for Income Tax Paid to Other State or Canadian Province (FOR FULL-YEAR AND SOME PART-YEAR VT RESIDENTS ONLY)

See Technical Bulletin 38 if you have capital gain, business income, or made adjustments to arrive at Federal Adjusted Gross Income.

Part-Year Residents - Go to our web site at http://tax.vermont.gov or contact the Department for information on how to file for income earned in another state while a VT resident.

Supporting Documents Required: Copy of 2008 tax return filed in the other state(s). For Canadian Province(s), a copy of 2008 provincial tax return filed, copy of Federal Form 1116 (Foreign Tax Credit) and Revenue Canada income tax return. $Convert amounts on Canadian returns to U.S. dollars.

A credit may be allowed against 2008 VT income tax for income tax paid in this tax year to another state or Canadian province on income taxed by both VT and the other taxing jurisdiction. The credit does not include city or county taxes. Credit for Canadian provincial income tax excludes the portion used as a foreign tax credit on Federal Form 1040.

More Than One State or Province?

• Complete a VT Calculation B for each state or Canadian province. Do not combine the income and credit of all states or Canadian provinces on one Schedule IN 112.
• Add Line 6 from each VT Calculation B to get the tax credit entry on Form IN-111, Section 5, Line 23.
• Attach a Schedule IN-112, VT Calculation B for each state or Canadian province as well as a copy of each state or Canadian provincial income tax return to your VT income tax return.

Line 1a

Enter your adjusted gross income from sources outside VT in 2008. Include only income that is taxed by VT and also taxed by another state or Canadian province.

Line 1b

Enter the long-term capital gains from Form IN-111, the smaller of Line 14c or 14e for the gain included in Line 1a. The capital gain included in Line 1a cannot be greater than capital gain on Federal Form 1040, Lines 13 and/or 14. The capital gain exclusion is limited to the long-term capital gain reported on Federal Form 1040, Line 13. See Technical Bulletin 38.

Line 1c

Subtract Line 1b from Line 1a and enter result.

Line 2a

Enter the adjusted gross income from Form IN-111, Line 10.

Line 2b

Enter Capital Gains exclusion from Form IN-111 (the smaller of Line 14c or 14e).

Line 2c

Subtract Line 2b from Line 2a and enter result.

Line 3

Enter the VT Income Tax from Form IN-111, Section 4, Line 20.

Line 4

Divide Line 1c by Line 2c; then multiply the answer by Line 3, and enter result. This is the amount of VT tax that would have been due on the income taxed in another state or Canadian province.

Line 5

Enter the amount of 2008 tax year income tax paid to the other state or Canadian province on the income reported on Line 1c of this schedule. $County and city taxes cannot be included. Use only the tax paid; withholding is not the income tax liability.

Line 6

Enter the lesser of Line 4 or Line 5. This is the allowable tax credit. Enter this amount on Form IN-111, Section 5, Line 23.

VT Calculation C VT Earned Income Tax Credit (FOR FULL-YEAR AND PART-YEAR VT RESIDENTS ONLY)

Taxpayers Not Eligible for credit:

• Nonresidents of VT
• Those with filing status of Married Filing Separately or Civil Union Filing Separately. Supporting Documents Required: Evidence of earned income such as W-2 or self-employment schedule(s). Part-Year Residents must also file Schedule IN-113.

Complete the Federal earned income tax credit worksheet before doing the VT calculation. A taxpayer must be allowed the Federal earned income tax credit to be eligible for the VT earned income tax credit. Vermont uses the Federal earned income tax credit definitions and rules.

• Eligibility questions A and B must be answered. The claim will be disallowed if the questions are not answered. For Line 1 or Line 7: Use entry from Federal Form 1040, Line 64a; or Form 1040A, Line 40a; or Form 1040EZ, Line 8a.

Full-Year Residents Only

Line 1

Enter the amount of your Federal earned income tax credit.

Line 2

Multiply Line 1 by 32%. Enter the result and also enter on Form IN-111, Section 7, Line 31c. This is the VT earned income tax credit.

Part-Year Residents Only

Line 3

Enter the amount of wages, salaries, tips, etc. from Schedule IN-113, Part I, Line 1, Columns A and B respectively.

Line 4

Other earned income includes income from a business, partnership, or farm. Add the amounts on Schedule IN-113, Part I, Lines 6, 10, and 12, Columns A and B respectively.

Line 5, Column A

Add Lines 3 and 4 in Column A and enter result.

Line 5, Column B

Add Lines 3 and 4 in Column B and enter result.

Line 6

Divide Line 5, Column B by Line 5, Column A. Enter the result as a percentage carried out to two decimal places. This is the percentage of 2008 income earned in VT that is eligible for the VT earned income tax credit.

Example $1,200 (Line 5, Column B) / $3,300 (Line 5, Column A) = .3636 or 36.36%

NOTE: Adjustment can never be more than 100.00%.

Line 7

Enter the amount of your Federal earned income tax credit.

Line 8

Multiply Line 7 by 32% and enter result.

Line 9

Multiply Line 8 by Line 6. Enter the result and also enter on Form IN-111, Section 7, Line 31c. This is your VT earned income tax credit.

VT Calculation D VT Income Tax Credits

Line 1 VT Higher Education Investment Plan (VHEIP)

Supporting Document Required: Statement or certificate from VT Student Assistance Corporation or administrator of the investment plan.

You may be eligible for a tax credit on contributions made during calendar year 2008 to the VT Student Assistance Corporation higher education investment plan. The tax credit equals 10% of the first $2,500 of contributions per beneficiary. For jointly filed returns, each spouse can contribute to a beneficiary's account and each spouse may claim the credit for his or her contributions. Contributions made by another person not listed as the account owner (except spouses filing jointly) are not eligible for the credit.

Example: Canute and Olga, husband and wife, file a joint income tax return. Canute opens a VHEIP account for Junior, a grandchild, with a $2,500 contribution in 2008. Canute also opens a VHEIP account for Sissy, a grandchild, with a $1,000 in 2008. Olga contributes $1,000 to Junior's account and contributes $3,000 to Sissy's account. Canute's contributions provide a tax credit of $350 (10% of $2,500 + 10% of $1,000). Olga's tax credit is $350 (10% of $1,000 + 10% of $2,500 max). The tax credit available to the joint return is $700. The contributions may come from the spouse's joint bank account or their individual accounts.

Example: Ollie and Lena, husband and wife, file married separately income tax returns. Ollie opens a VHEIP account for Olaf, his son, with a $2,500 contribution in 2008. Ollie also opens a VHEIP account for Freida, his daughter, with a $1,000 in 2008. Lena contributes $1,000 to Olaf's account and $3,000 to Freida's account. Ollie's tax credit is $350 (10% of $1,000 + 10% of $2,500 max). Since Lena is not a named account holder and filing separately, she cannot claim a credit.

Example: Briget opens an account for Arkin, her son. She contributes $2,500 to the account in 2008. Uncle Jim also makes a $1,000 contribution to Arkin's account. Briget's contribution provides a $250 tax credit for her. Since Uncle Jim is not the owner of the account, he cannot claim a credit.

For more information on the VT Higher Education Investment plan, go to the VSAC website at www.vsac.org or call 1-800-637-5860 Monday through Friday, 8 a.m. to 8 p.m.

Taxpayers receiving tax credit for Lines 2, 4 & 5 through S corporations, LLCs, LLPs, or partnerships, enter the name of each entity and its FEIN on the schedule.

Line 2 Angel Venture Capital Credit

A taxpayer may earn a tax credit by investing a capital gain in an eligible venture capital business. The tax credit is equal to 3% of the capital gain income invested. For more information, go to Tax Credits topic on our web site at http://tax.vermont.gov in the Individual section.

Line 3 Commercial Film Production

A taxpayer may receive a credit against VT income tax if the taxpayer's state of residence also taxes income received from a dramatic performance in a commercial film production. The credit equals the difference between the income taxed at the VT tax rate and the income taxed at the other state's highest personal income tax rate.

Line 4 Charitable Housing

A taxpayer making an investment in an eligible housing charity may receive a credit against VT income tax. The credit is the difference between the net income that would have been earned by the charitable threshold rate and the actual net income received, but not more than three percent of the average outstanding principal balance of the investment during the taxable year. The Commissioner of Housing and Community Affairs calculates the credit.

Line 5 Qualified Sale of Mobile Home Park

A taxpayer may receive a credit against VT income tax equal to seven percent of the taxpayer's gain subject to Federal income tax on a qualified sale of a mobile home park. A qualified sale means the sale is made to a group made up of a majority of the mobile home park tenants or to a nonprofit organization representing such group. Credit exceeding the tax liability may be carried forward for up to three years.

Line 6 Total Credits

Add entries from Lines 1-5 in Column C. Enter on Form IN-111, Line 24, unless you claim income tax credits on Schedule IN-119. For Schedule IN-119 filers, enter on the appropriate Schedule IN-119 line(s). To obtain Schedule IN-119, go to our web site at http://tax.vermont.gov or call 802-828-2515.