Tax Credits

Question 1

What is a tax credit?

Answer 1

A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe to the government.

Question 2

True or False: Tax credits reduce the amount of taxable income.

Answer 2

False. Tax credits reduce the tax owed, not the taxable income.

Question 3

What is the difference between a refundable and a non-refundable tax credit?

Answer 3

A refundable tax credit can result in a refund if it exceeds the tax owed, while a non-refundable tax credit can only reduce the tax owed to zero.

Question 4

Fill in the blank: The _____ tax credit is designed to assist low to moderate-income working individuals and families.

Answer 4

Earned Income

Question 5

Name a tax credit is available for educational expenses?

Answer 5

1) American Opportunity Tax Credit (AOTC)
2) Lifetime Learning Credit

Question 6

True or False: Tax credits can be claimed for child care expenses.

Answer 6

True.
Criteria:
-Must have earned income credit
-Needed childcare to attend work or look
for work
-Provider must not be another dependent,
spouse, or parent unless the child is over 13 and disabled.
-Child must be 0-12 all year

Question 7

What is the maximum amount of the Child Tax Credit per qualifying child for the tax year 2024?

Answer 7

$2,000 per child

Question 8

Multiple choice: Which of the following is NOT a type of tax credit? A) Nonrefundable B) Refundable C) Deduction D) Business

Answer 8

C) Deduction

Question 9

What form is typically used to claim tax credits?

Answer 9

Form 1040

Question 10

True or False: Tax credits are only available to individuals and not to businesses.

Answer 10

False. Both individuals and businesses can qualify for tax credits.

Question 11

What is the purpose of the Adoption Tax Credit?

Answer 11

To help offset the costs associated with adopting a child.

Question 12

Fill in the blank: The _____ tax credit is aimed at reducing the tax liability for those who make energy-efficient home improvements.

Answer 12

Residential Energy

Question 13

What is the Lifetime Learning Credit?

Answer 13

A tax credit for qualified tuition and related expenses for eligible students enrolled in higher education.

Expenses for the future year paid in the current tax year qualify if the class or program begins within the first three months of the new year .

Tax payers with a dependent in school can claim this credit if they pay more than 50% of their living expenses.

Question 14

True or False: The amount of tax credits you can claim is unlimited.

Answer 14

False. There are specific limits on various tax credits.

Question 15

What is the purpose of the First-Time Homebuyer Credit?

Answer 15

To encourage first-time home purchases by providing a tax credit.

Question 16

Multiple choice: Which tax credit is specifically for low-income working families? A) Child Tax Credit B) Earned Income Tax Credit C) Adoption Tax Credit D) None of the above

Answer 16

B) Earned Income Tax Credit

Question 17

What are the eligibility requirements for the American Opportunity Tax Credit?

Answer 17

Must be enrolled at least half-time in a degree or certificate program and have qualified education expenses.

Materials can be purchased outside of the institution

This credit is 40% refundable

This credit is available for four school years

Halftime or more enrollment required

No felony history

Max credit is $2500

Question 18

True or False: Tax credits can be carried forward to future tax years.

Answer 18

True, but only for certain types of credits—

adoption tax credit, the charitable contribution itemized deduction, 529 plan deductions at the state level, and capital losses.

Question 19

Empty

Question 20

Fill in the blank: The _____ tax credit is available for taxpayers who make energy-efficient improvements to their homes.

Answer 20

Energy Efficiency

Question 21

What is the purpose of the Health Coverage Tax Credit?

Answer 21

To assist individuals in paying for health insurance premiums.

Question 22

True or False: You can claim multiple tax credits in the same tax year.

Answer 22

True.

Question 23

What is the maximum amount of the Lifetime Learning Credit per tax return?

Answer 23

$2,000

Question 24

Multiple choice: Which tax credit is designed to help offset the costs of higher education? A) Child Tax Credit B) American Opportunity Tax Credit C) Earned Income Tax Credit D) All of the above

Answer 24

B) American Opportunity Tax Credit

Question 25

What is the Child and Dependent Care Credit?

Answer 25

A tax credit available to taxpayers who incur expenses for the care of qualifying individuals while they work or look for work.

Question 26

List criteria to receive the American opportunity, education credit.

Answer 26

No felony
Phased out at AGI of 80K or $160 joint
Must be halftime student or more
Supplies can be purchased anywhere
Max credit is $2500

Question 27

Is scholarship money taxed?

Answer 27

Scholarship money is tax-free as long as it’s used for qualified expenses.

Question 28

How much is the child tax credit?

Answer 28

Up to $2000 per child under age 17 on Dec 31st.
This is a nonrefundable credit, but if low tax liability reduces credit, the additional child tax credit which is refundable may kick in. The additional child tax credit is up to $1400. To qualify for the additional child tax credit there must be at least $2500 of earned income.
Together, the child tax credit and the additional child tax credit won’t exceed $2000 per qualifying child.TaxSlayer will do all the work for both!

Question 29

Educator Expense Credit

How much can be claimed Federally and State?

Answer 29

Federal - $ 300
State- $250

Enter into federal:
Deductions
- Adjustments - Educator Expenses

Enter into State:
Main State Menu
- Credits - “ teacher purchases of school and classroom supplies”

Question 30

Saver’s Credit

1. Which box 12 codes on a W-2 indicate a voluntary contributions?

2) What retirement tax forms would indicate that contributions were involuntary?

Answer 30

1) Boxes D E F G H

2) KPERS
DFAS. In such case, check the box:
“Does not carry forward to form 8880”

Saver’s Credit is calculated behind the scenes
However, if the taxpayer indicates that they contributed to their Roth IRA, enter /complete form 8880 SaversCredit. Do not enter IRA contributions that were already entered when you entered the W-2 information.

Question 31

Misc Box 12 Codes

Answer 31

W- employer contributions to health savings account. Involuntary.
G- Roll over within 60 days reinvested so not taxed
J - Non Taxable Combat Pay
DD - Employer sponsored health coverage
Not taxed
P- Moving Expense Reimbursement
Not taxed
C- Group Life Insurance premiums paid by employer IS taxed
AA- Roth IRA contributions under a 401 plan.
Taxable but qualifies for Saver’s Credit.
Since this has been entered with the W-2, no need to reenter on form 8880

BB AND EE are also Roth Contribution

Question 32

First Time Home Owners Credit and Repayment. Is this a credit currently available?

Answer 32

Was a program from 4/8/2008 thru 11/7/2009.

Repayment $500 or $250 per spouse
2024 is the Last Year to File Form 5405 as this is the 15th and final year of repayment for homes that received credit in 2009. If one spouse died, surviving spouse only responsible for their half.

Question 33

KANSAS First time Home Buyers

Answer 33

Contributions to first time home owners savings account entered on KS schedule S
This will be subtracted from income.

Unqualified withdraws from this savings account should be added via KS Schedule S

Max contributions
3000 per person / 6000 per couple
Max= 24,000 and 48000 per couple
Grows tax free up to $50,000

Question 34

Voluntary Contributions to an IRA may earn the taxpayer a “Saver’s Credit”. What are the income limits to receive thus credit?

Answer 34

The Saver’s Credit can be claimed by: Married couples filing jointly with adjusted gross incomes up to $76,500. Heads of household with adjusted gross incomes up to $57,375. Married individuals filing seperately and singles with adjusted gross incomes up to $38,250.

Question 35

How much will a taxpayer get if they qualify fir the saver’s credit?

Answer 35

Depending on your adjusted gross income and tax filing status, you can claim the credit for 50%, 20% or 10% of the first $2,000 you contribute during the year to a retirement account. Therefore, the maximum credit amounts that can be claimed are $1,000, $400 or $200.

TaxSlayer will do the calculations

Question 36

Do you need a four year degree to qualify for the Educator’s Expense Deduction?

Answer 36

No

Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who worked in a school for at least 900 hours during the school year.