Tax Credits Flashcards
What is a tax credit?
A tax credit is an amount of money that taxpayers can subtract directly from the taxes they owe to the government.
True or False: Tax credits reduce the amount of taxable income.
False. Tax credits reduce the tax owed, not the taxable income.
What is the difference between a refundable and a non-refundable tax credit?
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.
Fill in the blank: The _____ tax credit is designed to assist low to moderate-income working individuals and families.
Earned Income
Name a tax credit is available for educational expenses?
1) American Opportunity Tax Credit (AOTC)
2) Lifetime Learning Credit
True or False: Tax credits can be claimed for child care expenses.
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
What is the maximum amount of the Child Tax Credit per qualifying child for the tax year 2024?
Taxslayer will calculate. Taxpayer must have at least $2500 in earned income to qualify
$2,000 per child
Multiple choice: Which of the following is NOT a type of tax credit? A) Nonrefundable B) Refundable C) Deduction D) Business
C) Deduction
What form is typically used to claim tax credits?
Form 1040
True or False: Tax credits are only available to individuals and not to businesses.
False. Both individuals and businesses can qualify for tax credits.
What is the purpose of the Adoption Tax Credit?
To help offset the costs associated with adopting a child.
Fill in the blank: The _____ tax credit is aimed at reducing the tax liability for those who make energy-efficient home improvements.
Residential Energy
What is the Lifetime Learning Credit?
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.
True or False: The amount of tax credits you can claim is unlimited.
False. There are specific limits on various tax credits.
What is the purpose of the First-Time Homebuyer Credit?
To encourage first-time home purchases by providing a tax credit.
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
B) Earned Income Tax Credit
What are the eligibility requirements for the American Opportunity Tax Credit?
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
True or False: Tax credits can be carried forward to future tax years.
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.
Empty
Fill in the blank: The _____ tax credit is available for taxpayers who make energy-efficient improvements to their homes.
Energy Efficiency
What is the purpose of the Health Coverage Tax Credit?
To assist individuals in paying for health insurance premiums.
True or False: You can claim multiple tax credits in the same tax year.
True.
What is the maximum amount of the Lifetime Learning Credit per tax return?
$2,000
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
B) American Opportunity Tax Credit
