M3 Tax Computation and Credits

Question 1

For 2017 a reduced tax rate of 20% (if taxpayer is in 39.6 tax bracket, 15% (most taxpayers) or 0% is provided for ? (2)

Answer 1

Qualified dividends

Long-term capital gains

Question 2

How to calculate the income tax liability in 2017 for a taxpayer with a single filing status and 92,000 taxable income.

Answer 2

(0-9,325) = 932.50
(37,950-9,325) = 4,293.75
…. until reach 92,000 in the bracket and then add ALL together

Question 3

Tax credits. 7 NONrefundable tax credits (reduce tax, but no refund so can’t go below 0)

Answer 3

• Child and dependent care credit
• Elderly and permanently disabled credit
• Education credits (lifetime learning)
• Retirement savings contribution credit
• Foreign tax credit
• General business credit
• Adoption credit

Question 4

Tax credits. 5 Refundable tax credits

Answer 4

• Child tax credit
• Earned income credit
• Withholding taxes (W2)
• Excess social security paid
• AOTC (40% refundable)

Question 5

Child and dependent care. Maximum EXPENDITURES in 2017 for one dependent? For two dependents?

Answer 5

One = 3,000
Two = 6,000

Question 6

Child and dependent care. Credit computation:
__% for AGI less than 15,000
__% Phaseout credit decreases by 1% for each 2,000 of AGI over the $15,000 but not below __%
__% AGI more than 43,000 is $600 or $1,200 (if two ore more qualifying dependents)

Answer 6

MAX 35% if AGI less than 15,000
Phase-out 20-35%
MIN 20%

Question 7

Elderly/permanently disabled credit. Formula while also applying the base amounts (p. R2-42)

Answer 7

Gross amount (given)

Rate

Question 8

AOTC. Max credit amount and requirement

Answer 8

2,500 per student
Paid for a student’s first four years of postsecondary education (college)
Per student basis (so multiple kids are OK to take credit)
Enrolled at least half-time
Phase outs
Refundable portion = 40%

Question 9

Lifetime learning credit. Maximum amount

Answer 9

2,000 per year

Question 10

Adoption credit.2017 amounts per child/per special needs child

Answer 10

13,570

Question 11

Adoption credit. Which expenses do NOT apply?

Answer 11

Medical expenses

Question 12

Retirement contribution credit. Maximum amount and what is the AGI Threshold

Answer 12

1,000 (for 2,000 contribution per taxpayer) for married / joint income 0-37,000
*As income goes up, credit goes out - completely phased out by 62,000 MFJ, 46,500 HOH, 31,000 Single

Question 13

Foreign tax credit. Limited to the lesser of?

Answer 13

Foreign taxes paid OR

(Taxable income from all foreign ops / taxable income + Exemptions ) * US Tax

Question 14

Foreign tax credit. Carryforward/back rules

Answer 14

Back one year

Forward 10 years

Question 15

Child tax credit. Amount

Answer 15

1,000 per qualifying child 
*phase out:
110,000 MFJ
75,000 unmarried
55,000 married filing separate

Question 16

Earned income credit age limits?

Answer 16

over 25, under 65

Question 17

Excess Social Security. Credit allowed if has ___

Answer 17

Two or more employers. NOT allowed a credit if only one employer - employer must refund the excess to the employee

Question 18

Small business health care tax credit. Amount

Answer 18

up to 50% of employer’s costs of the plan premiums

Question 19

Residential energy credits. Up to __%

Answer 19

30%

Question 20

Estimated Taxes - must pay estimated taxes if __ or more tax liability owed

Answer 20

1,000 or more

Question 21

Estimated Taxes. Two requirements of paying

Answer 21

1) 90% of current year liability OR
2) 100 percent of last year’s liability (safe harbor)

*110% if AGI is in excess of 150,000 (MFJ)