Taxpayer Tax Credit

Changes Starting with 2008 Return

Utah tax law was significantly changed for tax years beginning 2008. The following former deductions from income are now used to compute a nonrefundable tax credit that is offset against your Utah tax liability:

The deduction for personal and dependent exemptions, and
The standard deduction or itemized deductions (net of any state income tax deduction itemized), whichever is greater.

Taxpayer Tax Credit

The new credit is calculated in two parts:

The initial credit is equal to 6 percent of the total personal exemption amount and the standard or itemized deduction amount.
The initial credit is then subject to a phase-out when income exceeds certain limits in the law.

The calculation of the taxpayer tax credit appears on the front of the TC-40, Utah Individual Income Tax Return, on lines 11 through 20. No documentation needs to be attached.

Personal Exemptions

Utah allows 75 percent of the personal and dependent exemption amount claimed on your federal return when calculating the taxpayer tax credit. For 2008, the federal exemption amount is $3,500 per exemption; the Utah exemption amount is $2,625 (75% of the $3,500 federal exemption amount).

Note: The disabled exemption claimed in prior years is no longer available. This exemption has been repealed.

If your federal adjusted gross income (entered on the Utah TC-40, line 4) is more than the amount shown below for your filing status, your federal and Utah exemption amounts are limited. If your federal adjusted gross income is more than the amount shown, complete the Exemption Worksheet below to determine your Utah exemption amount to be used to calculate the taxpayer tax credit.

Federal AGI	Filing Status
$159,950	Single
$239,950	Married Filing Jointly
$119,975	Married Filing Separately
$199,950	Head of Household
$239,950	Qualifying Widow(er)

Worksheet to Determine Utah Exemption Amount
1. Federal exemption amount from: Form 1040, line 42 Form 1040A, line 26 Form 1040NR, line 39
2. Multiply line 2 by .075 (75%)
Enter the amount from line 2 on the Utah TC-40, line 11

Standard or Itemized Deductions

The greater of the federal standard deduction or the federal itemized deductions is used in the calculation of the taxpayer tax credit.

Federal Standard Deduction

For 2008, the federal standard deduction is:

Standard Deduction	Filing Status
$5,450	Single
$10,900	Married Filing Jointly
$5,450	Married Filing Separately
$8,000	Head of Household
$10,900	Qualifying Widow(er)

The additional federal standard deduction for each blind or age 65 or over taxpayer is:

Additional Amount	Filing Status
$1,350	Single
$1,050	Married Filing Jointly
$1,050	Married Filing Separately
$1,350	Head of Household
$1,050	Qualifying Widow(er)

For 2008 only, the federal law was changed to allow a taxpayer who claims the standard deduction to also deduct a portion of their real property tax. This additional deduction is considered part of the standard deduction and allowable for Utah credit purposes. The maximum real property tax “standard deduction” allowed is:

Real Property Tax	Filing Status
$500	Single
$1,000	Married Filing Jointly
$500	Married Filing Separately
$500	Head of Household
$500	Qualifying Widow(er)

Itemized Deductions

If itemized deductions are greater than the standard deduction, the itemized deductions may be used in the calculation of the taxpayer tax credit. However, before using the itemized deductions, an adjustment must be made for 1) state income taxes claimed as an itemized deduction, and 2) itemized deductions that are limited because federal adjusted gross income exceeds certain limits.

The details of the itemized deductions are shown on federal Schedule A, and the total itemized deductions from Schedule A, line 29 is carried to form 1040, line 40. For Utah purposes, the amount of state and local income taxes entered on line 5 of the Schedule A must be subtracted from the total itemized deductions before using in the Utah credit calculation. (Total itemized deductions is entered on TC-40, line 12, and the adjustment to add-back the state and local income taxes is shown on line 14.)
If federal adjusted gross income is greater than the amount shown below, the itemized deductions may be limited. Check your federal tax return instructions for how to calculate the limitation on the itemized deductions.

Federal AGI	Filing Status
$ 79,975	Married Filing Separately
$159,950	All Other Filing Statuses

Phase-out Calculation

The taxpayer tax credit must be reduced by 1.3 percent of the income in excess of the following amounts:

$12,000 if filing as single,
$24,000 if filing as married jointly or qualifying widow(er),
$12,000 if filing as married separately, and
$18,000 if filing as head of household.

Income, for calculating the phase-out, is Utah Taxable Income shown on your Utah TC-40, line 8.

Credit Calculation Summary

The credit calculation, including the phase-out, may be summarized as follows:

Initial Credit – Total the personal exemption amount and the standard or itemized deductions (after the adjustment), then multiply by six percent.
Phase-out Calculation – Reduce total income (TC-40, line 6) by the base phase-out amount (TC-40, line 17), then multiply the remainder by 1.3 percent.
Taxpayer Tax Credit – Subtract the phase-out amount (step 2) from the initial credit (step 1).

The taxpayer tax credit is a nonrefundable credit. Any credit in excess of the tax liability cannot be carried back or forward.