Tax Credits

Estates and trusts are allowed all tax credits allowed to individuals except for:

  1. Tax credit for income taxes paid by individuals to other states or countries,
  2. Tax credit for child and dependent care,
  3. Tax credit for the disabled,
  4. Tax credit for children,
  5. Tax credit for charitable contributions,
  6. Tax credit for recycling oyster shells,
  7. Tax credit for premiums paid on long-term care insurance contracts,
  8. Tax credit for adoption expenses,
  9. Refundable earned income tax credit (Effective for tax years beginning on or after January 1, 2008.) and,
  10. Tax credit for children with disabilities who require special education.

Form D-407TC is used to report any tax credits claimed on an estate or trust return. The amounts reflected on Form D-407TC are the portions of the tax credits allocated to the trust or estate. A fiduciary required to pay an income tax to North Carolina for a trust for which he acts may claim a credit for tax imposed and paid to another state or country on income form sources within that state or country under the provisions of G.S. 105-160.4(a).

A resident beneficiary of an estate or trust, the fiduciary of which pays an income tax to another state or country on distributable income reportable to North Carolina which is derived from sources in the other state or country may claim a credit against his North Carolina tax for his share of tax paid the other state or country under the provisions of G.S. 105-160.4(e).

Part 5 of Form D-407TC is to be used in computing the tax credit allowable to the estate or trust. Before this schedule may be completed, however, there must be an allocation between the estate or trust and its beneficiaries of the tax paid and the gross income on which such tax was paid to the other state or country.

The fiduciary's share and each beneficiary's share of the gross income on which tax has been paid to another state or country is determined by the governing instrument and should be entered in the appropriate schedule on the return. The fiduciary's share of total gross income to be used in the tax credit computation schedule is the total gross income from Federal Form 1041.