R2- Tax Credits

Question 1

Refundable Tax Credits

Answer 1

Child Tax Credit -refund is limited
Earned Income Credit
Withholding taxes W2
Excess FICA social security paid
Long-Term unused minimum tax credit
American Opportunity Credit 40% Refundable
Adoption credit

Question 2

Child and Dependent Care Credit

Answer 2

-Non-Refundable
-General Rule
Both Parents working
Pay someone to babysit
Max-
1 Dependent $3000
2 or more $6000
Eligible People- Kids, 13 and under, disabled of any age, disabled spouse

Question 3

Child and Dependent Care Credit- Calcualtion

Answer 3

Max 35% of Eligible Expenses, AGI 15,000 or less
Phase out
Minimum 20% AGI more than 43,000

Question 4

Credit for the Elderly or Permanently disabled

Answer 4

15% of Eligible Income if
65 or older 
or
Under 65 and retired due to permenant disability
AGI Limit
Eligible Income reduced by-
1. social security payments
2. 1/2 of AGI that exceeds
single 7,500
MFJ 10,000

Question 5

Credit for the Elderly or Permanently disabled- Calculations

Answer 5

Single/ MFJ
5000/7500
- Social Secuirty
-1/2 over 7500/ 1/2 over 10000
Balance
x15%
Credit

Question 6

Education Tax Incentives- American Opportunity Credit

Answer 6

For qualified tuition, fees, books
first 4 yrs of college
Credit=2500
1.100% of first 2000 expenses
2. 25% of next 2000 expenses

per student basis/ multiple kids OK
40% refundable =1000 out of 2500 or qualified expenses
no credit - if student a convicted felon

Question 7

Education Tax Incentives- Life time learning Credit

Answer 7

tuition and fees except books
only one kid per yr
2000 max per yr
20% of qualified 10000 expenses

Question 8

Education Tax Incentives- Coverdell Savings Account Distributions

Answer 8

Use in conjuction not for same expenses with education credits
AOC + Lifetime OK
No double dipping- expenses used for AOC or Lifetime cannot be used used for Coverdell

Question 9

Qualified Tuition Programs

Answer 9

No deduction No income

gift tax rules

Question 10

Adoption Credit

Answer 10

Refundable
per child $12650
special needs child $12650
phase out
reasonable and necessary expenses
not available for adopting child of a spouse or surrogate parenting
no medical expenses
claimed after the years payment is made until the adoption is final

Question 11

Retirement savings contributions credit

Answer 11

non refundable

Question 12

Foreign tax Credit

Answer 12

Refundable
Limited to lesser of-
Foreign Taxes paid
or
taxable income from foreign/ taxable income + exemptions x US tax rate= foreign tax credit
1 back 10 forward

Question 13

General Business Credit

Answer 13

-Credit cannot exceed net income tax

Regular Income

• AMT
• non refundable tax credits other than AMT credit
• greater of 1. 25% of regular tax over $25,000 or
  2. tentative minimum tax

Question 14

General Business Credit- Calculation

Answer 14

Tentative Tax X Allowable % = Allowable $
0-25,000 100%
Excess 75%

Tax
225000
- 25000  100% of 25,000
200000
150000  75% of remaining after 25,000
  50000  Pay

Question 15

Work Opportunity Credit

Answer 15

Non-refundable
40% of 6000 of first yr wages=2400
40% of 3000 of summer youth=1200
Total 3600

Qualified groups
Handicapped
Vietnam Veterans
18-24 yrs olds of poor families
food stamp recipient

Question 16

Child Tax Credit

Answer 16

limited Refund
1000 for each qualifying child
CARES rule applies
Credit to the extend lesser of -
a.Excess child tax credit
b.Earned income less 3000 x 15%

Question 17

Earned Income credit

Answer 17

refundable

Question 18

Witholding Tax

Answer 18

pay check credit

refundable

Question 19

Excess FICA

Answer 19

social security tax withheld

1. If 2 or more employers- if FICA withheld more than req’d , such excess as a credit against income tax
2. if one employer- excess must be refunded by employer to employee

Question 20

Small Employer pension plan start-up costs credit

Answer 20

50% of 1000 of qualified startup costs= 500 per yr for 3 yrs

Question 21

Small Business Health care tax credit

Answer 21

tax credit for providing health care coverage to their employees
A credit for 35% of costs, if employer contributes 50% of costs
non refundable
unused amounts one back, 20 forward
cost of family members excluded
No double dipping- do not use same expenses as employee benefit expense

Question 22

Health coverage Tax Credit

Answer 22

a credit of 80% of health care premiums

Question 23

Which are refundable Tax Credits?

Answer 23

Child Tax Credit- Limited
Earned Income Tax Credit
Excess FICA
Adoption Credit
Witholding Tax
American Oppourtunity Credit 40%