R1 - M7 - Credits Flashcards
What are the nonrefundable credits?
Child and dependent care credit
Elderly and permeantily disabled
Lifetime learning credit
American opportunity credit (60% nonrefundable)
Retirment savings contribution credi t
Foreign tax credit
General Business credit
Adoption credit
What are the refundable credits?
Child tax credit
Earned income credit
Federal income tax withheld
Excess Social Security tax paid
American opportunity credit (40 percent refundable)
What is the child and dependent care credit?
20% to 35% of work related care for qualifying persons.
3000 for one qualifying person
6000 for two or more qualifying people
Normally babysitter or daycare, but not elementry school, or private school. Has to be age 13 or less, or anyone who is disabled.
If you are single, you have to work, if you are married, both has to be working. Since one person could watch the kid if both were not working.
How do you calculate the child and dependent care credit?
Amount that is eligible is the lesser of:
earned income of the lesser earning spouse;
actual expenses incurred;
the maximum allowable amount (3000 or 6000)
Then you take it times 20% or 35% depending on their income (20% for high income, or 35% for low income). AGI of more than 43,000. He said in the vidoe that they will do either high income or less income.
What is the American Opportunity Tax Credit?
This is a credit for a students first four years of postsecondary education. Can apply to more than one student at a time. So if you have three kids all going to school at the same time, they can all get the credit.
Maximum AOTC is 2,500. 100% on the first 2000 and then 25% on the next 2000.
Up to 1000 may be refunded (2500*.4)
For the AOTC credit, how long do they have to be in school? Who does this apply to?
At least half time for at least one academic period. This can apply to the taxpayer, spouse, or dependents.
Not available, if felon or criminals.
What is the phase out for the AOTC?
Begins with AGI exceeding 80,000 (180,000 MFJ) and full phase out at 90,000(180,000 MFJ).
What is the lifetime learning credit?
Applies to only one student. Up to 20% of 10,000. Includes graduate courses, undergrad, job improvement courses.
Same phase out as AOTC credit.
Can you use both the AOTC and Lifetime learning?
Yes, if you have two kids, and one is in undergrad and one is in grad school. You can use both credits in the same year.
Cant use both in the same year for the same student. If you graduate in the spring from undergrad and start grad school in the fall, cant use both credits.
What is the coverdell education savings account?
An account where you can put money away for a child’s education.
Contributions are nondeductibe, max contribution per beneficary is 2k, beneficary has to be under 18, no limit to number of beneficary.
Are the coverdell distributions taxable?
If used for elementary, secondary, or higher education then no. Earnings also accumulate tax free.
AGI phase out is 95,000 -110,000 and 190,000 to 220,000.
What happens to the coverdell educations savings account when the beneficary hits 30 and has not used all the money?
They have to take it out, and then it becomes taxable with a 10% penalty.
If they rollover the amounts to another beneficary, then no tax impact.
What is a section 529 qualified tuition program?
This is when a person gives money to a university or state so the courses are paid for when their kid goes to college.
Distributions are excluded from gross income, if used for school.
What is the elderly or permeantely disabled credit?
Credit of 15% of eligible income is a credit for individuals:
Who are 65 years of age or older
Or;
Under 65 years, retired due to being total or permintly disabled, and recieved disability income for the year.
What is the most you can deduct for the elderly or permantly disabled credit?
5000 - For a single person or qualifying surviving spouse
7500 - If married filling joint and both spouses qualify
5000 - If MFJ and one spouse qualifies
3750 - If married filling seperate
If under 65 and has disablity income of less than 5000 - 5000
What are the AGI limits for the elderly or permanitly disabled credit?
Eligbile income is reduced by
Social security payments and
Half of the AGI for single (over 7500) or married (over 1000) is reduced from the eligible amount.
What is the adoption credit?
For 2024, the maximum credit allowed is the amount of qualified expenses up to 16,810. Antying not used is carried forward up to five years. Does not include medical expenses.
This does not apply to a child of a spouse, like a step child. Surrogate, and medical expense for child.
Can only be claimed once the adoption is final.
Phase out if you make to much.
Foreign tax credit
This is for foreign tax that you paid. You take the foreign income divided by total worldwide income times the US tax amount. This gives you the credit. Carry back one year, or carryforward 10 years.
What is the retirement savings contribution credit?
This is when a taxpayer who does not make a lot of money, can get an adjustment for their IRA contributions and a credit.
Applies to - at least 18, not a full time student, not a dependent of another.
10%, 20%, or 50%. Depends on AGI. Maximum contribution 2,000 that gets the credit.
No carryover.
Work opporunity credit
You hire someone that has a disantvatnge.
40% of first 6000 of first years wages
40% of first 3000 to certain summer youth.
Small employer retirement plan start up costs credit
Have no more than 100 employees that got at least 5k in wages, at least one participant is a non highly compensated employee. Available first three years of the plan.
Take the greater of 1,000 or 250 times each employee enrolled caped at 5,000.
Small business healthcare credit?
What is the child tax credit?
2000 credit for qualifying child, under the age of 17. Must be a citizen.
Phase out based on AGI 200,000 if single 400,000 at married.
Refundable amount, to the lesser of;
excess child tax credit over liablity; earned income in excecss of 2500 mutlipted by 15%; 1700 per qualifying child.
A non depednent child, up to 500 per child.
Earned Income Credit
Live in the US, meet certain low income thresholds, and more. (Looks like they care about you knowing this is a refundable credit)
Wages, salaries, tips, employee compensation, earnings from self employment.
If you have qualified child, you can get more money back.
You cannot take this credit if you have too much investment income.
Excess FICA
When you have social security tax taken out of your paycheck, and you took out more than you have to. Normally happens when you switch jobs.
Premium tax credit
Give people a credit so they can buy health insurance on the marketplace.
For estimated taxes, what is the mimium you need to pay to avoid a penalty?
Lesser of:
90% of the current years tax or
100% of last years tax.
If their income is over 150,000 110% of last year tax is used calculate the safe harbor amount.
What happens you if you do not pay enough?
Illness, casualty, disaster, other things where this can be waived.
What is the medicare tax?
Once you make 250k MFJ, 125K MFS, or 200k for all other taxpayers, you pay .9% in tax on wages excess of that. This is to cover people who cannot afford medicare.
What is the Net Invesement Income tax?
This is when people who are rich, have to pay 3.8% additional tax to cover people who have medical needs but do not have the insurance to cover it all.
Normally looks at investment income, but will be investment income or AGI, whichever is less.
What is the Kidde tax?
Put some investment income in your childs name. This way the interest that they earn, is on low tax brackets. The income is taxed at the parents rate, for children of 18 or under. Or 18-23 if does not provide half of their support.
