R1 - M7 - Credits

Question 1

What are the nonrefundable credits?

Answer 1

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

Question 2

What are the refundable credits?

Answer 2

Child tax credit

Earned income credit

Federal income tax withheld

Excess Social Security tax paid

American opportunity credit (40 percent refundable)

Question 3

What is the child and dependent care credit?

Answer 3

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.

Question 4

How do you calculate the child and dependent care credit?

Answer 4

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.

Question 5

What is the American Opportunity Tax Credit?

Answer 5

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)

Question 6

For the AOTC credit, how long do they have to be in school? Who does this apply to?

Answer 6

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.

Question 7

What is the phase out for the AOTC?

Answer 7

Begins with AGI exceeding 80,000 (180,000 MFJ) and full phase out at 90,000(180,000 MFJ).

Question 8

What is the lifetime learning credit?

Answer 8

Applies to only one student. Up to 20% of 10,000. Includes graduate courses, undergrad, job improvement courses.

Same phase out as AOTC credit.

Question 9

Can you use both the AOTC and Lifetime learning?

Answer 9

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.

Question 10

What is the coverdell education savings account?

Answer 10

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.

Question 11

Are the coverdell distributions taxable?

Answer 11

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.

Question 12

What happens to the coverdell educations savings account when the beneficary hits 30 and has not used all the money?

Answer 12

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.

Question 13

What is a section 529 qualified tuition program?

Answer 13

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.

Question 14

What is the elderly or permeantely disabled credit?

Answer 14

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.

Question 15

What is the most you can deduct for the elderly or permantly disabled credit?

Answer 15

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

Question 16

What are the AGI limits for the elderly or permanitly disabled credit?

Answer 16

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.

Question 17

What is the adoption credit?

Answer 17

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.

Question 18

Foreign tax credit

Answer 18

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.

Question 19

What is the retirement savings contribution credit?

Answer 19

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.

Question 20

Work opporunity credit

Answer 20

You hire someone that has a disantvatnge.

40% of first 6000 of first years wages

40% of first 3000 to certain summer youth.

Question 21

Small employer retirement plan start up costs credit

Answer 21

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.

Question 22

Small business healthcare credit?

Question 23

What is the child tax credit?

Answer 23

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.

Question 24

Earned Income Credit

Answer 24

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.

Question 25

Excess FICA

Answer 25

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.

Question 26

Premium tax credit

Answer 26

Give people a credit so they can buy health insurance on the marketplace.

Question 27

For estimated taxes, what is the mimium you need to pay to avoid a penalty?

Answer 27

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.

Question 28

What happens you if you do not pay enough?

Answer 28

Illness, casualty, disaster, other things where this can be waived.

Question 29

What is the medicare tax?

Answer 29

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.

Question 30

What is the Net Invesement Income tax?

Answer 30

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.

Question 31

What is the Kidde tax?

Answer 31

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.