EA Exam 2025 Part 1 - Unit 14: Tax
Credits Questions And Answers With
Verified Solutions Already Passed!!!
Tax Credit: - ANSWER✔✔ Reduces a taxpayers liability on a dollar for dollar
basis.
Why is a tax credit more valuable than a tax deduction? - ANSWER✔✔ A tax
deduction of the same dollar amount only reduces the amount of taxable income. A
tax credit reduces a taxpayers liability.
What are the two main types of tax credits? - ANSWER✔✔ Refundable or Non-
refundable
Common nonrefundable tax credits: - ANSWER✔✔ Foreign tax credit, credit for
child/dependent care expenses, child tax credit, adoption credit, lifetime learning
credit, retirement savings contributions credit, residential energy credit
What credit is only partially refundable? - ANSWER✔✔ American Opportunity
Credit
Which form can an individual taxpayer not use if claiming a credit? -
ANSWER✔✔ Form 1040EZ
Common refundable credits: - ANSWER✔✔ Additional Child Tax credit, Earned
Income Tax Credit, Premium Tax Credit
,Child Dependent Care Credit: What is the credit for? - ANSWER✔✔ The credit is
for child care expenses for children under 13 and for disabled dependents of any
age.
Child Dependent Care Credit: Percentage range - ANSWER✔✔ 20%-35% of
qualifying expenses based on income
Child Dependent Care Credit: Annual Cap - ANSWER✔✔ $3,000 for one child
and $6,000 for two or more children.
Child Dependent Care Credit: If the taxpayer receives a reimbursement under an
FSA the amount is treated as pre-tax. How must the taxpayer determine the credit?
- ANSWER✔✔ Qualified expenses - reimbursed amount = Child Dependent Care
Credit amount
Child Dependent Care Credit: Eligibility tests (5) - ANSWER✔✔ 1. Qualifying
Person Test,
2. Earned Income Test,
3. Work-related expense test,
4. Joint return test,
5. provider identification test.
Child Dependent Care Credit: Qualifying Person Test - ANSWER✔✔ 1. A
dependent child under the age of 13 at the time care was provided
2. a spouse who is physically or mentally unable to provide for themselves
3.any other disabled person that is unable to provide for themselves and the tax
payer could claim as a dependent if not for certain circumstances.
, Child Dependent Care Credit: Earned Income Test - ANSWER✔✔ Generally both
spouses must work, there must be earned income during the year. The credit is not
available for MFS filers. The credit cannot exceed income for the year for the
lowest earning spouse or single individual.
Exceptions are for: Full-time students, or a Disabled spouse. The deemed earned
income amount is $250 per month or $500 per month with 2 or more dependents.
Child Dependent Care Credit: Work-Related Expense Test - ANSWER✔✔ Child
and dependent care expenses must be work related to qualify. The taxpayer must
be working or searching for work.
Child Dependent Care Credit: Work-Related Expense Test - qualifying expenses -
ANSWER✔✔ 1. Education - preschool or after-school care for children in
kindergarten or above.
2. Care outside the home for a child under 13 or in a care center for a disabled
dependent.
3. Transportation for a care provider to take a qualifying person to or from a place
where care is provided.
4. Fees and deposits paid to an agency or preschool to acquire child care.
5. Household services if they are at least partly for the well-being and protection of
a qualifying person.
Child Dependent Care Credit: Work-Related Expense Test - non-qualifying
expenses - ANSWER✔✔ 1. Tuition for Kindergarten and above
2. Summer school or tutoring
3. Overnight camps (Day camps generally qualify)
4. Cost of transportation not provided by a care provider.
5. Forfeited deposit to a daycare center.
Credits Questions And Answers With
Verified Solutions Already Passed!!!
Tax Credit: - ANSWER✔✔ Reduces a taxpayers liability on a dollar for dollar
basis.
Why is a tax credit more valuable than a tax deduction? - ANSWER✔✔ A tax
deduction of the same dollar amount only reduces the amount of taxable income. A
tax credit reduces a taxpayers liability.
What are the two main types of tax credits? - ANSWER✔✔ Refundable or Non-
refundable
Common nonrefundable tax credits: - ANSWER✔✔ Foreign tax credit, credit for
child/dependent care expenses, child tax credit, adoption credit, lifetime learning
credit, retirement savings contributions credit, residential energy credit
What credit is only partially refundable? - ANSWER✔✔ American Opportunity
Credit
Which form can an individual taxpayer not use if claiming a credit? -
ANSWER✔✔ Form 1040EZ
Common refundable credits: - ANSWER✔✔ Additional Child Tax credit, Earned
Income Tax Credit, Premium Tax Credit
,Child Dependent Care Credit: What is the credit for? - ANSWER✔✔ The credit is
for child care expenses for children under 13 and for disabled dependents of any
age.
Child Dependent Care Credit: Percentage range - ANSWER✔✔ 20%-35% of
qualifying expenses based on income
Child Dependent Care Credit: Annual Cap - ANSWER✔✔ $3,000 for one child
and $6,000 for two or more children.
Child Dependent Care Credit: If the taxpayer receives a reimbursement under an
FSA the amount is treated as pre-tax. How must the taxpayer determine the credit?
- ANSWER✔✔ Qualified expenses - reimbursed amount = Child Dependent Care
Credit amount
Child Dependent Care Credit: Eligibility tests (5) - ANSWER✔✔ 1. Qualifying
Person Test,
2. Earned Income Test,
3. Work-related expense test,
4. Joint return test,
5. provider identification test.
Child Dependent Care Credit: Qualifying Person Test - ANSWER✔✔ 1. A
dependent child under the age of 13 at the time care was provided
2. a spouse who is physically or mentally unable to provide for themselves
3.any other disabled person that is unable to provide for themselves and the tax
payer could claim as a dependent if not for certain circumstances.
, Child Dependent Care Credit: Earned Income Test - ANSWER✔✔ Generally both
spouses must work, there must be earned income during the year. The credit is not
available for MFS filers. The credit cannot exceed income for the year for the
lowest earning spouse or single individual.
Exceptions are for: Full-time students, or a Disabled spouse. The deemed earned
income amount is $250 per month or $500 per month with 2 or more dependents.
Child Dependent Care Credit: Work-Related Expense Test - ANSWER✔✔ Child
and dependent care expenses must be work related to qualify. The taxpayer must
be working or searching for work.
Child Dependent Care Credit: Work-Related Expense Test - qualifying expenses -
ANSWER✔✔ 1. Education - preschool or after-school care for children in
kindergarten or above.
2. Care outside the home for a child under 13 or in a care center for a disabled
dependent.
3. Transportation for a care provider to take a qualifying person to or from a place
where care is provided.
4. Fees and deposits paid to an agency or preschool to acquire child care.
5. Household services if they are at least partly for the well-being and protection of
a qualifying person.
Child Dependent Care Credit: Work-Related Expense Test - non-qualifying
expenses - ANSWER✔✔ 1. Tuition for Kindergarten and above
2. Summer school or tutoring
3. Overnight camps (Day camps generally qualify)
4. Cost of transportation not provided by a care provider.
5. Forfeited deposit to a daycare center.
