Overlooked Tax Credits in Kentucky

It's easy to overlook tax credits in Kentucky, just as it is in other states. For the most part, taxpayers have to seek out credits, which aren't often offered upfront. Because of this, it behooves taxpayers in the Bluegrass State to have a general knowledge of oft-overlooked credits; taking advantage of these credits and incentives helps put money in the bank come tax season.

Family Credits

In addition to common credits such as Personal and Dependency Credits and the Nonrefundable Family Size Tax Credit, Kentucky offers an Education Tuition Tax Credit, which offers up to $500 worth of credit for undergrads at Kentucky universities. In 2007, the Kentucky Council on Postsecondary Education estimated that 1/3 of eligible families don't take advantage of these overlooked credits. By filing IRS Form 740 or 740-NP, Kentuckians can receive the Child and Dependent Care Credit, which credits taxpayers for 20 percent of the federal credit total from Form 2441A or Form 1040A. The state's New Home Tax Credit offers up to $5,000 against the purchase of a single-family residence.

Energy Credits

Kentucky offers a full range of energy-related tax credits that may be overlooked by those not in the know. The state's Renewable Energy Tax Credit and Energy Efficiency Tax Credits – both personal tax credits – offer up to 30 percent of the the cost energy-related home improvements such as solar heaters, solar panels, windy energy systems, heat pumps, fans and weatherization projects with a cost up to $500. Kentucky's Energy Efficient Home Improvements Program provides rebates up to 25 percent of the total cost of whole-home energy efficiency improvements funded by loans up to $20,000.

Business Credits

Because the state offers so many financial incentives and tax credits for businesses, Kentucky business owners might overlook potential tax savings. For instance, the state's Kentucky Business Investment program rewards manufacturing and agricultural business that have created at least 10 new full-time jobs for state residents with up to 100 percent credit against the Kentucky corporate income tax. The Kentucky Industrial Revitalization Act offers the same credit for companies that have invested in the rehabilitation of manufacturing or agricultural businesses and coal mines. Kentucky businesses that create a minimum of one new full-time job or expend a minimum of $5,000 on qualifying equipment can claim the Kentucky Small Business Investment Credit, which can total up to $3 million for one fiscal year.

Other Credits

As perhaps one of its most obscure tax credits, the state of Kentucky offers tax breaks for filmmakers. Feature films with a minimum budget of $500,000, commercials that cost at least $200,000 or documentaries that cost at least $50,000 can claim a 20 percent refundable tax credit on qualifying expenses. The Endow Kentucky Tax Credit offers 20 percent credit on sums given to permanent endowment funds, not to exceed $10,000.

References

• Kentucky Department of Revenue: Common Kentucky Individual Income Tax Credits; January 2011
• Kentucky.gov: Millions of Dollars of Education Tax Credits...; April 2007
• Kentucky Department of Revenue: New Home Tax Credit; June 2010
• EnergySavvy.com: Energy Rebates and Tax Credits in Kentucky
• Kentucky Cabinet for Economic Development: Kentucky Business Incentives
• Film Production Capital: Kentucky Film Tax Credits
• Mountjoy Chilton Medley: Endow KY Tax Credit; Vicki Buster; April 2011

Resources

• WDRB.com: Tax Guide