Line 71 of Form 1040 offers one final opportunity for taxpayers to claim tax credits. In fact, three different credits may be claimed on this line item – the Health Coverage Tax Credit, the Prior Year Minimum Tax Credit, and the Undistributed Capital Gains Credit.
Health Coverage Tax Credit: Form 8885 offers a credit opportunity for certain displaced workers who paid for continued health insurance after being laid-off. Eligible taxpayers will receive Form 8885 if they (1) qualify as a trade adjustment assistance (TAA) recipient, alternate TAA recipient or Pension Benefit Guaranty Corporation pension recipient and (2) were covered by an eligible health insurance plan. Line 7 of Form 8885 should be used to determine the amount of this tax credit. This credit is unavailable for anyone who is able to be claimed as a dependent on someone else’s tax return.
Prior Year Minimum Tax Credit: Form 8801 can be used by taxpayers who, in a prior year(s), paid the Alternative Minimum Tax (AMT). Taxpayers that did previously pay this AMT should have record of the prior year’s Form 6251, which was previously used to calculate the AMT due. Once located, that Form 6251 will assist the claiming taxpayer in completing the current year’s Form 8801. A fully calculated Form 8801 may show a positive number on Line 27. If so, that value represents the permitted Credit that will be claimable on Line 71 of Form 1040.
Undistributed Capital Gains Credit: Form 2439 is issued to taxpayers who invested in either a regulated investment company (RIC) or a real estate investment trust (REIT). More specifically, the Form reports how much of the investor’s long-term capital gains were undistributed during the year. Box 2 of Form 2439 is most critical for tax purposes; it lists the dollar amount of taxes that the RIC or REIT paid on behalf of the taxpayer (via the undistributed profit flowing from the investment). This is the amount the eligible taxpayer may claim as a Line 71 credit.
NOTE: Taxpayer claiming more than one of the Line 71 credits should enter the total value of the claimed credits on the blank space.
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