Californians get three new tax credits
By Kay Bell • Bankrate.com

California taxpayers will see three new credits on their 2000 state returns. One will help state residents meet the expense of looking after dependents, another will reward teachers and a third will help taxpayers cover long-term medical care costs.

The Child and Dependent Care Expenses Credit will give some taxpayers up to $907, the Long-Term Care Credit will provide up to $500 to qualified filers and eligible educators could get as much as $1,500 from the Teacher Retention Credit.

Child and Dependent Care Expenses credit
For the first time, Californians will be able to take advantage of a child and dependent care credit, which is based on the similar federal income tax credit. Like the Internal Revenue Service provision, this tax break basically reimburses working taxpayers the costs of hiring help to look after a child or other person who depends on the taxpayer for care.

Filers who qualify for the federal credit and have an adjusted state income of $100,000 or less can claim a percentage of the federal break on their California income tax forms 540, 540A and 540NR. The credit cannot be claimed by filers of the simplest form, the 540-2EZ.

The credit is allowed to California filers in the following percentages, based on income:

The maximum that can be collected with the California credit is $907. The state credit, however, goes one step further than the IRS break. While the federal credit can cut a taxpayer's bill to zero, the California credit is refundable -- it can give a filer money back regardless of the tax bill. If the taxpayer's tax liability is less than the credit due, the state will send the taxpayer a check for the difference.

And even if a Californian does not file a federal return or claim the federal credit, he or she can still collect the state credit. In this case, the filer would have to complete federal Form 2441 (or federal Schedule 2 for Form 1040A) to determine how much the federal credit would have been and then follow the California return instructions to claim the state credit.

The Long-Term Care credit generally is available to a taxpayer who pays for the care of someone disabled or ill in the taxpayer's home for 180 days or more. It is worth $500 for each individual whose care is paid for by the taxpayer.

A taxpayer generally qualifies for this credit if the individual needing the care is the taxpayer, the taxpayer's spouse or the taxpayer's dependent. In addition, the ill or disabled person must meet age-related care requirements, and the taxpayer applying for the credit cannot make more than $100,000.

To claim the credit, California taxpayers need to file Form FTB 3504 with their income tax returns. The form's instructions and included worksheets should help filers determine how much the credit will save them. The credit, however, is nonrefundable. That means it can bring a state tax bill down to zero, but if the credit is more than the tax bill, the excess credit is forfeited.

Based on years of service in the California school systems, qualified teachers could get a nonrefundable credit ranging from $250 to $1,500. State lawmakers designed the Teacher Retention Credit to partially compensate educators for their unreimbursed classroom materials and supplies expenses.

Who's eligible? Teachers who, for at least four years, have:

• Held a California preliminary or professional teaching credential. Credentialed classroom teaching in other states counts toward determining the credit.
• Been a classroom teacher in any California public or private kindergarten through 12th grade school (including those on Indian reservations or military installations located in California)
• Received wages or salary for teaching services for the year in which you are claiming the credit. That is, you cannot take the credit in a year in which you did not teach even if you meet the other requirements and plan to go back to teaching in the future.

The amount of credit available depends on how long a teacher has worked:

Eligible teachers should file Form 3505 and claim the credit on line 28 or 29 of their California Form 540 or on line 37 or 38 of their 540NR. The credit cannot be taken by filers of the simpler Forms 540A or 540-2EZ.

State officials estimate that these three new credits will cut Californians' tax bills by more than $500 million. Forms needed to apply for the credits can be found at the California Franchise Board's Web site, a link to which is included in Bankrate's tax profile of the state.

-- Posted Feb. 8, 2001