R2 INDV TAX - Adj, Ded, Credits 3 (M)

Question 1

The American Opportunity Credit

Answer 1

The student’s first four years of post-secondary (college) education at an eligible educational institution
100% of first $2,000
25% of the next $2,000
The qualified expenses are on a per student basis

Question 2

The Lifetime Learning Credit

Answer 2

Available for an unlimited number of years for qualified tuition and related expenses (except books) at eligible educational institutions
The credit is equal to 20% of eligible expenses up to $10,000

Question 3

Adoption Credit

Answer 3

A credit for qualifying expenses of adopting a child is available
All reasonable and necessary expenses, costs, and fees are available for the credit
The credit is not available for adopting the child of a spouse
Medical expenses do not qualify as eligible expenses

Question 4

Retirement Savings Contributions Credit

Answer 4

Nonrefundable tax credit that may offset both regular and alternative minimum tax is available for contributions to either a traditional IRA or Roth IRA
At least 18 years of age by the end of the tax year
Not a full-time student
Not a dependent

Question 5

Foreign Tax Credit

Answer 5

Lesser of
foreign taxes paid or;
(Taxable income from all foreign operations/(Taxable Income + Exemptions)) * U.S. Tax

Question 6

Work Opportunity Credit

Answer 6

Available to employers who hire employees from a targeted group
40% of first $6,000 of first year’s wages

Question 7

“Child” Tax Credit

Answer 7

Taxpayers may claim a $1,000 tax credit for each qualifying child

Question 8

Earned Income Credit

Answer 8

Refundable

Eligible taxpayers can get advanced payments from their employers because the credit is assured

Question 9

Excess FICA (Social Security Tax Withheld)

Answer 9

An employee who has had Social Security Tax withheld in an amount greater than the maximum for a particular year may claim the excess as a credit against income tax (in the payment section), if that excess resulted from correct withholding by two or more employers

Question 10

Alternative Minimum Tax

Answer 10

A tax designed to ensure that taxpayers who take a large number of tax preference deductions pay a minimum amount of tax on their income

Question 11

Tentative Minimum Tax Calculation

Answer 11

Regular taxable income
\+/- Adjustments
\+ Preferences
= Alternative Minimum Taxable Income
- Exemption
= Alternative Minimum Tax Base
x Tax Computation
= Tentative AMT Tax
-Tax Credits
=Tentative Minimum Tax

Question 12

Alternative Minimum Tax Calculation

Answer 12

Tentative Minimum Tax
- Regular Tax
= Alternative Minimum Tax

Question 13

AMT Exemption Amounts

Answer 13

For 2014, the exemption amount is $52,800 less 25% (AMTI - $117,300) for single taxpayers, $82,100 less 25% (AMTI - $156,500) for joint filers, and $41,050 less 25% (AMTI - $78,250) for married individuals filing separately.

Question 14

AMT Exemption Formula

Answer 14

$82,100
                 AMTI
                 - 156,500
                 = Excess
                 x 25% 
Reduction
= AMT Exemption

Question 15

AMT Adjustments

Answer 15

Defined in the tax code as specific items that may increase or decrease AMTI because the treatment of the item is different for AMT purposes than regular tax purposes

Question 16

AMT Adjustments due to Timing Differences (PANIC)

Answer 16

Passive Activity Losses
Accelerated Depreciation
Net Operating Loss of the Individual Taxpayer
Installment Income of Dealer
Contracts - Percentage of Completion v. Completed