Lesson 2 Basic Income Tax

Question 1

Under Accrual-basis accounting, when do taxpayers report an amount in their gross income?

Answer 1

Earliest of
1. When payment is received
2. When the income is due to the taxpayer
3. When the taxpayer earns the income

Question 2

What is the constructive receipt doctrine?

Answer 2

It states that when income is readily available to the taxpayer, and that income is not subject to substantial limitations or restrictions, that income is deemed to be constructively received and should be taxed.
1. Substantial limitation or restriction on either the time or the manner of payment, and
2. If the financial condition of the debtor makes payment of the payment in questions impossible, there is no constructive receipt.

Let’s say you have a dividend check mailed out on december 31st, year 1. Does not receive dividend check until year 2 January 3d. Not required to include dividend in income until YR2 because they weren’t available year 1. Also you cannot assign tax liability on income that has been earned to another party.

Question 3

What is difference between taxable Year and fiscal year

Answer 3

1. Fiscal year is 12-month period ending on last day of the month other than December. This can be elected if adequate records are maintained. If individual wants to change their tax year, they must fill out form 1128 to get IRS approval
2. Taxable year- an annual accounting period for keeping records and reporting income and expenses

Question 4

What are additional standard deductions amount and how do you qualify for them?

Answer 4

1. Taxpayers age 65 or older or blind are entitled to increased standard deduction. $1850 for individuals

Question 5

What taxpayers are not eligible for the standard deduction?

Answer 5

1. Married filing separately when other spouse itemizes deductions. If one spouse itemizes deductions, as opposed to taking standard deduction, the other spouse must also itemize
2. Nonresident alians
3. Individuals filing tax returns of less than 12 months.

Question 6

When taxpayer is claimed as a dependent of another taxpayer will have a limited standard deduction. A dependent’s standard deduction is equal to the greater of

Answer 6

1. $1250 (2023)
2. $ 400 plus earned income (but not exceeding the normal standard deduction)
3. If the dependent is ae 65 or older and/or blind, however the standard deduction may be higher

If individual made income of 10K than deduction would be 10,400 but cannot exceed 10400

Special rules apply to person who can be claimed as a dependent
1. may have reduced basic standard deduction
2. required to file a tax return based on different rules from gross income test by taxpayers who are not dependent

Question 7

Qualifying child must meet all four tests

Answer 7

1. Relationship test- Must be taxpayer’s child, dcescendent of taxpayer’s child, taxpayer’s brother, sister, stepbrother, stepsister, half brother, half sister or a descendent of taxpayer’s brother, sister, stepbrother, stepsister, half brother, or half sister.

Qualifying child is descendant of the taxpyaer, taxpayer’s sibling, or a descedewnt of taxpayer’s sibling. (Cousin not a qualifying child)

2. Abode Test- Quailfying child must live with taxpayer for more than half the year. Taxpayer and the dependent are considered to occupy the household even during temporary absenses due to a special cirmcustances such as illness, education, business, vacation, or military service.
3. Age Test- must be under the age of 19 as of the end of calendar year or a student under the age of 24 as of the end of the calendar year in order to salsify the age test. Must be a full-time student at education institution during five months of the calendar year.
4. support test- if qualifying child does not provide more than one-half of his or her own support during the year. If a child is the taxpayer’s child and is a full time student, amounts received as scholarships are not considered to be support.

Question 8

What are tie-braker rules for taxpayer allowed to claim the credits

Answer 8

Both Parents- The parent with whom the child lives with the longer
Both parents and child lives with each for same amount of time- the parent with highest adjusted gross income
Only one parent- The parent
Neither is a parent- the taxpayer with high adjusted gross income

Question 9

When is the noncustodial parent have a qualifying child?

Answer 9

1. The parents are divorced or legally seperated under a decree of divorce or seperate maintenance, are seperate under a written seperation agreement, or they lived apart at all times during the last six months of the year
2. Child receives over one-half of his support for the year from his parents.
3. Child is in custody of the parents for more than half the year
4. The custodial parent signs a statement that she will not claim the child for the year, and the noncustodial parent attaches the statement to his return (may use Form 8332)

Question 10

What is the gross income Test

Answer 10

Gross income of the dependent must be less than the personal exemption amount ($4700 for 2023 even though personal exemption was repealed) for the year. In contrast for a qualifying child, there is no such test

Question 11

How does the Support Test Work?

Answer 11

Taxpayer must provide more than one-half of the support of a dependent. Support normally includes providing housing, food, clothing, education, and medical treatment.

Question 12

How does Joint Return Test work?

Answer 12

To satisfy the joint return test, a married dependent must not file a joint return with a spouse unless a tax return is filed only to claim a refund for tax withheld, if neither spouse is otherwise required to file a tax return, and if no tax liability would exist for either taxpayer on separate returns.

Question 13

What is Citizenship or Residency Test

Answer 13

A dependent must be a citizen or national of the United States or a resident of the United States, Canada, or Mexico during some part of the year

Question 14

What are the social security benefits calculator

Answer 14

Married Filling Jointly
1. MAGI *32,000
2. MAGI $44,000

If it clears 1st hurdle Lower of:
50% Social Security Benefits
50%[MAGI +.50 Social SECURITY benefits)- Hurdle 1]

If it clears hurdle 2
1. 85% Social Security Benefits
2. 85% [MAGI +.50(Social Security Benefits)- Hurdle 2] plus the lesser of
$6,000 for MFJ or $4500 for all other taxpayers or the
Taxable amount calculated under the 50% formula and only considering hurdle 1

All other Taxpayers except MFS =O
1.$25,000
2. $34,000

Question 15

What are characteristis of phantom interst?

Answer 15

It is included income even though the lender did not actually receive money. The lender is considered to have made a gift to the borrower in the amount of imputed interest. They are considered gift loans, or tax avoidance loans. Requires lender to impute the interst that would have been earned had the lender made a bona fide interest-bearing market loan.

Below market rate loans by a corporation to a shareholder in that corporation are treated as a dividend to shareholder. as shareholders make loan payments, the payments are treated by corporation as interst income

These are treated as compensation for the employee and are subject to employment taxes. As employee makes loan payments, the employer must treat the payments as taxable interst income.

Question 16

How is interest calculated on below market loans

Answer 16

1. If Loan is 10k or lessinterest income is $0
2. If Loan is greater than 100K calculate using the fed funds rate
3. for loans greater than 10K or less than or equal to 100K use the lesser of of Net Investment Income or Fed Fund Rate. If Net investment income is Less than or equal to $1,000 zero dollars in interest is computed.

Question 17

What are the elements of a gift?

Answer 17

-the donor must have the intent to make a voluntary transfer
-the donor must be compentent to make the gift
-the donee must be capable of receiving the gift
-donee must take dlivery
-donor must actually part with dominion and control over gifted property

-Gratuitious transfer of property
-Donor acted out of a “detached and interested generosity made out of affection, respect, admiration, charity or like impulses.

Whether something is a gift is determined by motive, or whether transfer was made as a result of
-detached and dinterested generosity
-from “constraining force of any moral or legal duty” or from the “incentive of anticipated benefit of an enconomic nature”

Amounts transferred from employer to employee won’t be treated as a gift.

Question 18

How are life Insuranced Proceeeds taxed?

Answer 18

Losses arent’ deductible, however any cash received in excess of what owner paid in premiums is taxed. When life insurance policy is transferred for valuable consideration. the amount received is includable in the owner’s gross income to the extent that amounts exceeds the owner’s basis in the policy. In addition the death benefit will be taxable to new owner. In additioal death benefit proceeds will be taxable to new owner.

Proceeds of life insurance can still be excluded from gross income even if the policy is transferred for valuable consideration. if policy is trasnferred to the insured, partner of insured, partnership in which insured is partner, corporation in which the insured is a shareholder or officer, transferred by tax-free exchange or giftl

Viatical settlement- terminally ill individual, somebody who is expected to result in death in 24 months or less after the date of the certification. Chronically Ill, means individual who has been certified by a licensed health care practitioner as being unable to perform (without substantial assistance from another individual) at least 2 activities of daily living (bathign, toileting, transferring, eating, dressing, continence) for period of at least 90 days due to a loss of functional capacity.

MEC- Fails 7 pay test. If accumulated amount paid under contract during first 7 years exceeds the sum of the net level premiums which would have been paid if the contract provided for paid up future benefits after the payment of 7 level annual premiums. WIthdrawals or loans are treated is lifo treatment.

Question 19

How are scholarships taxed?

Answer 19

Gross income does not include any amount received as qualified scholarships by individual who is a candidate for a degree at educational orgnaization. The extent that the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses. Does not include amounts received for room and board. This amount must be taxable

Qualified C

Question 20

Gain on Sale of Personal Resideance

Answer 20

250k if owned for at least two of the last 5 years
500K for married filling jointly- either spouse meets the ownership requirements, both spouses meet the use requierment
-neither spouse is ineligible for the exclusion as a result of having excluded gain on the sale of personal residence is last 2 years.
- Reduced exclusion is available based on change in employment, change of health, other unforseen circumstances. When reduced exclusion isavailable, the amount excluded is based on the period of ownership between the last sale and the current sale (pro rata). Law extends period of time during which a surviving spouse may use the joint tax filers’ $500,000 home sale gain exclusion before being treated as a single individual entitled on to $250k exclusion. Allowed for up to 500K gain exclusion as long as the sale occurs no later than two years after date of death of the deceased spouse. Any appreciation during non qualified use periods are not subject to exclusions

Question 21

Distributions from ROTH IRAs and ROTH 401ks/403B Plan

Answer 21

Tax-exempt and not included in gross income
Qualified ROTH IRA distibutions are from an account that has been held for at least 5 years and the distibution must be made on account of first time home purchase disability, death, or on/after attainment of age 59.5
Qualified ROTH 401k distributions are from an account that has been held for at lesat 5 years and the distribution must be amde on account of disability, death, or on or after attainment of age 59.5 Distributions from Roth 401(K) will be distributed on pro-rata basis.

Question 22

Which types of injuries and sickness are compensation are excluded from gross income?

Answer 22

• Works Compensation for personal physical injury or sickness
  -Any damages received on account of personal physical injuries or sickness
  -Payments from Accident or health insurance that is personally owned by the taxpayer

Punitive damages aren’t excludable from income
Damages from emotional distress must be included in gross income unless damages are attributable to physical injury or sickness or are paid for reimbursements of actual medical expenses arising from emotional distress

Question 23

What are various employer-sponsured accident and health plans?

Answer 23

Medical- Contribution sby employer to an accident or health plan to provide compensation, through insurance or otherwise, directly to an employee for personal injuries and sickness are excluded from gross income to employee. If employees are indemnified in excess of amount of expenses actually incured, such excess amounts are taxable income to employee

Group Term Life insurance- Considered ordinary and necessary business expense for employer
Exceptions:
-Deductions made on behalf of sole proprietors or partners,
-deductions made on behalf of stockholders, unless they are providing substantial services,
-when employer is named the beneficiary

Question 24

What are Section 79 Requirements?

Answer 24

Death benefit is excluded from federal income tax when it is provided to a group of employees through policy carried by the employer.
-Individual selection of coverage outside standard multiple of salary amounts is not permitted if the death benefit is to be excluded from gross income.

Exceptions to Section 79
=Ig group term insurance is used to trustees of qualified pension plan, the amount paid for the employer is taxable to employees.

Group term Not Taxable to employees when:
- the employees has terminated because of disability
- a qualified charity is named as beneficiary
- employer is named as the beneficiary

First 50k of coverage is not taxable to the employee, cost of excess coverage is determined by unifer premium Table 1
- Employee contributions are subtracted from annual cost to arrive at taxable income.

Question 25

Are meal and lodging taxable?

Answer 25

Not included in employee’s gross income if they are furnished by the employer:
1. On employer’s business premises
2. convenience of employer

In regards ot liding the employee is required to accept loding as a condition of employment in order for this lodging to be excluded from employee’s gross income.

Question 26

What are some additional employee fringe benefits

Answer 26

Dependent care Up to $5,000 of dependent care cost paid for by employer can be excluded from gross income

Athletic facilities- value of use of athletic facilities located on employer premises can be excluded from gross income

Educational assistance program-
employer provided educational assistance for undergraduate education is excludable from gross income. Payments for tuition, fees (and similar expenses), books, supplies, and equipment, instruction, or training, that improves or develops capabilities

Also includes tax-free education assistance benefits also include payments made after March 27, 2020 and before Jan 1, 2026 whether paid to the employee or to a lender, towards principal or interest on any qualified edcuationloan incurred by the employee for education of the employee. Exclusion is limited to $5,250 per year.

Adoption assistance exclusion limited to $15,950 (2023) of expenses
Phases out between MAGI of $239,230-$279,230

Cafeteria Plans
- If cash is received amount is taxable
-If nontaxable benefit is chosen, the benefit remains nontaxable

Question 27

What are additional classes of nontaxable employee benefits

Answer 27

nontaxable if:
employee receives services (not Property)
employer incurs no substantial additional cost in providing services
services offered are within line of business which employee works,
benefits offered on nondiscriminatory basis.

Qualified employee discounts nontaxable if
-disocunt not on realty or investment personalty
-items discounted is from same line of busienss which employee works
-discount cannot exceed gross profit on personalty or 20% on services
-benefit is offered on nondiscriminatory basis

Question 28

What are some de minimis fringe benefits?

Answer 28

Benefits are so small that accounting for them is impractical
Examples include
-Dinner Money
-Occasional personal use of company copying machine
-Company cocktail parties
-Picnic for employees

-Commuter highway vehicle and transit passes - employer deduction not permitted for 2023, EE may exclude it from income
-Qualified parking - ER Deduction not permitted for 2023 EE may still exclude it from income
- can be provided on discriminatory asis
- employee can choose between employer-provided parking and cash without loss of exclusion

Qualified moving expense reimbursements
1. may no longer be excluded from an employee’s gross income as a fringe benefit. ER’s may still reimburse a “qualified move” but the ER must include reimbursement in EE’s income.
Only exception is if you’re a member of armed forces and your move was due to military order and permanent change of station. You may be able to deduct your unreimbursed mvoing expenes for you, your spouse, and dependents.
Deductible moving expenses are confined to a reasonable expenses for the following:
-moving expenses not convered by reimbursements from government (or paid for directly by the government)
-moving household good sand personal effects from the former home to the new home
-traveling and associative lodging during the move from the former home to the new home

Question 29

What are some rules in regards to foreign earned income?

Answer 29

Foreign earned income exclusion $120,000 for 2023, foreign housing exclusion, or the foreign housing deduction, you must have the foreign earned income, your tax home must be in foreign country and you must be one of the following:
- US citizen who is bona fide resident of a foreign country or countries for an uninterruped period that includes an entire tax year,
-A US resident alian who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes entire tax year
-US citizen or US resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Question 30

Interest on which of the following bonds is not tax exempt?

Answer 30

• Private activity bonds that are not qualified bonds
  -Abitrage Bonds
  -Bonds that do not meet all the requirements of section 149

Question 31

How does Discharge of Indebtedness work?

Answer 31

• when credit cancels a debt, the discharge creates income for the debtor
• discharge of indebtedness is taxable only to the extent that the FMV of the debtor’s assets exceeds the debtor’s total liabilities immediately after the forgiveness.

Gain is generally lower of: amount of indebtedness canceled
-or the excess of assets over liabilities after debt is canceled.

Exceptions to inclusion include
-Debts discharged in bankruptcy
-certain student loan debt that is forgiven for public service
-qualified principal residence after December 31, 2020 and before January 1, 2026. Maximum discharge exclusion is $750,000 (375,000 for MFS)

Question 32

What is an above-the-line deduction (for AGI)

Answer 32

They are subtracted from taxpayer’s gross income in order to compute the taxpayer’s adjusted gross income

Gross Income - Adjustments = Adjusted Gross Income (AGI) - Itemized/Standard Deduction = Taxable Income

Functions of AGI
-Limiting measure (floors) for medical expenses
-limiting measure (ceiling) for charitable deductions
-determines deductibility of IRA Contributions
-determines phaseouts of other tax benefits

Question 33

What are common deductions for AGI

Answer 33

-trade or business expenses
-deduction from losses on sale or exchange of property
-deductions from rental and royalty property
-alimony payments (for divroce decrees prior to 12/31/2018)
One half of self-employment tax paid
-100% of health insurance premiums paid by self-employed individual
-contributions to pension, profit sharing, annuity plans, IRAs, ect
-Penalty on premature withdrawals from time savings accounts or deposits
-interst on student loans
-health savings account
-teacher expense deduction (up to $300 deduction for qualified expenses for primary and secondy education professionals)

Trade or business expenses
-ordinary
-necesary
-reasonable
-incurred in conduct of business
-Unreimbursed employee business expenses are no longer deductible as a miscellaneous itemized deduction, subject to the 2% of AGI Floor
-Alimony received is no longer income to payee nor deductible by payor for divorce decrees written or materially modified after 12/31/2018. Alimony for divorces finalized prior to 12/31/2018 will be grandfathered into the old rules

Alimony defined
-Payment in cash
-Pursuant to a divorceor separation instrument
-does not extend beyond death of payee
-isnot “excess alimoney payents”
-not between spouses filing jointly
-not part of sale household
-alimony received isearned income for IRA Purposes

What isn’t alimony
-elective non-alimony payments
-any payments that could extend beyond the recipient’s life. Let’s say payments are for period certain of 10 years. this wouldn’t be considered alimony payments
-child support
-rent-free occupancy of home

Question 34

What are certain deductions that may be above the line deductions for self employed individuals

Answer 34

1. Education expenses are deductible if they are incurred:
   -to maintain or improve existing skills or
   -to meet the requirements of the employer, profession, licensing, or state law.

Education expenses are not deductible if they are incurred:
-to meet minimum education standards for existing job, or
-will qualify taxpayer for new trade or business

expenses include:
-tuition
-books
-supplies
-transportation
-travel (including lodging and 50% meals)

Business Gifts- limited to $25 each plus wrapping
If value is $4 or less and name of business appears on item, not considered a gift (considered advertising)
-gifts to employers or superiors are not deductible

No deduction for any entertainment, 50% deduction for meals

Home offices deductible for self-employed. No longer deductible for W-2 employees.

Question 35

Adjusted Gross Income (Deductons From AGI)

Answer 35

It is called itemized deductions or “Below the Line”
include the following
1-medical expenses
2-certain state and local taxes
3 qualified chriable orgnaizations
4. casualty losses
5. certain personal interst expense
6. qualified business income
7. miscellaneous itemized deuctions not subject to the 2% Floor

Medical expenses (excess of 7.5% of AGI floor
- may deduct expenditures for themselves or their dependents
-prescriptions
-noncomesmetic surgiereis
-some qualified long-term care services
-insurance premiums including schedule for long-term care policies
-tuition for special, medically necssary schools (school for deaf or blind dependent)
-Capital expenditures, on advice of physician, to extent that the fair market value of property is not increased, includes operating expenses (cost of operating a pool),
for handicapped entrances and railings, there is no increased value test (note this does not apply to elevators)
-may deduct property taxes (only US Property)
-may deduct state income tax paid, or state and local sales tax. (actual or standardized table amount)
-taxes capped to $10,000 total per TCJA 2017
-Contribution to qualified charitable organizations.

Depending upon calissification of chritable organization and type of donated property, income deduction limitation for individual contribuitons is either 20, 30 , 50 or 60 percent of the Donor’s AGI Overall the total deduction contributions for the tax year cannot exceed 50 percent of donor’s AGI

Question 36

Maximum deduction for ordinary income property, short term capital gain prtoperty and all loss property

Answer 36

Lesser of adjusted basis or fair market value, basis cannot be used on a loss property. Ceiling for public charities 50% of AGI, 30% of AGI for private charities

Question 37

Maximum deduction for longer term capital gain property:
-intangible (stock bonds, ect)
-Real Property
Tangible Personalty (Related use)

Answer 37

Either fair market value or adjusted basis: 30% AGI IF FMV, 50% of AGI if using Basis
Celing for private charity 20% and must be basis

Question 38

Maximum deduction for Long Term Capital Gain Property:
Tangible Personalty (Unrelated Use)

Answer 38

Lesser of adjusted basis or fair market value
Public Charities 50% AGI
Private Chairities 20% AGI

Question 39

What do Public Charities include?

Answer 39

Churches, schools, hospitals, and governmental entities. Examples include Red Cross, Salvation Army ASCPA

Question 40

What do private charities include?

Answer 40

contributions that do not fit the definiation of public charity. include vertans orgnizations, fraternal orders, and certain private foundation that support comes from a small group as opposed tothe public

If taxpyer makes donations to both public and private charitable orgnaizations during a year. Any disallowed because of the AGI limitations may be carried over for 5 years and are used in a first-in-first out order. the 50% donations are considered first.

Question 41

What is deductions clustering

Answer 41

Allows for taxpayers to cluster itemized deduction together in one year and take the standard deduction in the following year. Four categories of itemized deduction that might be bunched are.
-early payment of state income or property taxes
-early payment of mortgage interest
-medical expenses
-charitable donations
For taxpayers that feel charitable but don’t have a specific charity they contribute to. they can use donor-advised funds. This allows for immediate tax deduction and distribution to a selected charity at another time. Donor-advised funds can be set up through a brokerage firm or a charity.

Question 42

What are benefits of Charitable contributions from an IRA

Answer 42

-Results
- contribution not treated as income to the IRA owner
-contribution is not treated as a charitable contribution
-contributions can count as the owner’s Required Minimum Distributions
-Charitable contributions from an IRA between 70.5 and 72 or 73 will no longer count towards RMDs for those attaining age of 72 prior to 1/1/2023

Owner must have reached 70.5 before making these contributions, Contributions cannot exceed $100,000 per year

Question 43

How do Casualty Losses work

Answer 43

1. Casualties are deductible in the year in which loss is sustained. Personal casualty losses are only deductible if a national disaster is declared by the president. Qualified disaster related personal casualty loss minus personal casualty gains can be deducted as additional standard deduction subject to a $100 per casualty floor. After the $100 floor, the loss must exceed 10% of AGI Floor.

Losses caused by fire, storm, shipwreck, other casualty or by theft. To be deductible loss must be from an event that is identifiable and damaging to taxpayer’s property, as well as sudden, unexpected and unusual in nature.

Theft includes robbery, burglary, embezzlement, ect but does not include missplaced items. Thefts are deductible in the year in which loss is discovered.

Effect of claims reimbersument-
if there is a reasonable prospect of full recovery, the loss (any amount not reimbursed) should be deducted in the year of settlment

If only partial recovery is expected, deduct in year of loss any amount not covered by the insurance.

Question 44

Amount of Casualty (only deductible if declared national disaster)

Answer 44

1. Amount of loss and its deductibility depends on whether: Loss is from nonpersonal (business or production of income) or personal property and whether loss is
   partial or complete.

Question 45

Certain personal Interest Expense

Answer 45

Special election can be made for LTCG to be treated as ordinary income to offset investment interest income

Question 46

How much interest is limited for mortgages?

Answer 46

750k, limited to two houses (primary and secondary residences) Qualified personal residence interest

Question 47

How does Qualified Business Income work?

Answer 47

Good for pass-through of entities for tax years 2018-2025. QBI deduction is below the line that is no affected by taxpayer’s standard deduction. Reduces taxable income but does not reduce adjusted gross income. Net result is to reduce tax rate on the business income by 20% Doesn’t include investment income (capital gains or losses, dividend income, or interest income) and not including reasonable compensation paid to an S Corp, owner, or guaranteed payments to a partneror LLC meber for services performed for the business. Combined QBI is the net amount deductible QBI for all qualifying businessses owned by the taxpayer plus qualified REIT dividend and qualified publicly traded partnership income

Question 48

What are various miscellaneous itemized deductions not subject to the 2% Foor

Answer 48

-Gambling Losses (to extent of gambling income)
-Credit for estate taxes imposed on IRD (income in respect to decedent’s assets)
-Loss on the disposition of an annuity contract
-Repayments of income (such as repayment of Social Security income when the tax payer fails the earning test)

Question 49

What is earned income limit?

Answer 49

1. General qualifications for credit. Must have earned income (employee or self-employed and must have qualifying child. Exception: credit is available for some taxpayers having no children.
   qualifying child must meet relationship, residency, and age tests

Credit amount
-Applicable percentage rate * earned income
-Applicable percentage rate and maximum amount of earned income re determined by the number of qualifying children.
-Credit for taxpayers having no children

Taxpayers aged 25-64

Question 50

What is the adoption expense credit?

Answer 50

Credit for qualified adoption expenses incurred in adoption of eligible child. Includes adoption fees, court costs, and attorney fees. Maximum credit is $15,950. Phase out rataby for modified AGI between 239,230 and 279,230

Eligible child is one that is less than 18 or physically or mentally handicapped

Adoption expense credit is nonrefundable credit but the excess may be carried forward for 5 years.

Question 51

What are some key facts of Child tax credit?

Answer 51

-$2,000 for each dependent child under age of 17
-Includes stepchildren and foster children
-Married taxpayers must file jointly to be eligable for credit
-Child me be under age of 17
-US Citizen
-Claimed as dependent on tax return
-Credit is phased out for modified AGI above specified levels

Question 52

Family Credit (Qualifying Dependent Credit)

Answer 52

A $500 credit for those who would qualify as a depndent (qualifying child 17 or over and a qualifying person)