R2 Tax Calculations & Credits Flashcards
What are the child/dependent care credit limitation?
Up to the lesser of:
-$3,000 ($6,000 for 2 or more kids)
Earned income (lowest one of either spouse)
-The actual child care expense
Then multiply by rate:
-35% up to $15,000 reduced by 1% for every $2,00 over to a minimum of 20% (can’t reduce below 20%)
Qualifying kid is under 13, any disable dependent unable to care for self or spouse who is disable and unable to care for self
Identify some tax credits
*Non refundable Credits Foreign tax credit Child and dependent care credit Elderly or disable credit Education credit (AOC and LTC) Adoption credit Retirement plan contribution credit General business credit
*Refundable Credits Child tax credit Earned income credit Withholding taxes Excess Social Security paid Long term unused minimum tax credit
Describe the tax credit for elderly or disable
Either 65 or totally and permanently disabled and have disability income
If married and both are over 65 or disable max deduction is $7,500 which is reduced by all SS benefits and 1/2 of AGI over $10,000 and the balance is multiplied by 15% to get credit
Credit is only to the amount of tax liability cannot create a refund
State the limitations of the American Opportunity Tax Credit
The credit is for the 1st 4 years of college it is a max of $2,500:
- 100% of first $2,000
- 25% of second $2,000
It is per student and not available if dependent committed a felony drug offense in the calendar year
Refundable up to 40% or $1,000
What are the eligibility requirements for the retirement plan contribution credit?
At least 18 by close of tax year
Not a full time student
Not a dependent
Income limits apply
State the formula to determine the amount of the foreign tax credit.
- Can claim as either a deduction it credit
- There is no limitation on amount of foreign taxes paid that are claimed as deductions
- Overall limit for the credit:
(Net foreign income / world wide income) x U.S. tax = foreign tax credit limit
- Credit is the lesser of limit or actual tax paid
- Carry excess back 1 forward 10
State the limitations of the work opportunity credit
40% of the first $6,000 of wages per employee paid during the first year of employment
40% of the first $3,000 to certain summer youth
For employers who hire people from a targeted group like handicap, Vietnam veterans, certain food stamp families and 18-24 year olds from poor families
Describe the child tax credit
$1,000 tax credit for each qualifying child
Qualifying child:
- CARES rules except must be under 17
- Higher income taxpayers must reduce credit by $50 for each $1,000 by which AGI exceeds: $110,000 MFJ or $75,000 single
What are the legibility requirements for EIC?
- Live in the US for more than half of taxable year
- Meet the low income thresholds
- Not have more than a specified amount of disqualified income
- Be over 25 but under 65 if there are no qualifying children for spouse as well if married
- File joint return with spouse if married
