Tax Planning Exam Questions And
Answers With Verified Solutions Rated
A+ Newly Updated 2025
What are some of the most important personal credits? - ANSWER✔✔ - Child Tax
Credit
- Child and Dependent Care Credit
- Tax Credit for the Elderly and Disabled
- Adoption Credit
- American Opportunity Tax Credit
- Lifetime Learning Credit
Child Tax Credit - ANSWER✔✔ Taxpayers are allowed a non-refundable credit of
$2,000 for each qualifying child under the age of 17
Child & Dependent Care Credit - ANSWER✔✔ a tax credit that offsets your taxes
in a direct dollar-for-dollar manner for child and dependent care expenses
The maximum amount of child and dependent care expenses that qualify for the
credit is $3,000 for one qualifying individual and $6,000 for two or more
individuals.
Howard and Loni are married, file a joint return, and have two children, aged 9 and
11. Their combined AGI is $45k. They incur $5k of child-care expenses during the
current year. What is their child and dependent care credit? - ANSWER✔✔ $1k
$5000 spent ($6k is the limit for two or more children) x 20%
,Adoption Credit - ANSWER✔✔ A nonrefundable credit is allowed for qualified
adoption expenses. The amount of the credit in 2019 is $14,080, including a child
with special needs and generally is allowable in the year the adoption is finalized
American Opportunity Tax Credit (AOTC) - ANSWER✔✔ - Applies to each
student
- Taxpayers are allowed up to a $2,500 credit for tuition and related expenses paid
during the taxable year for each qualified student.
- Qualified tuition and related expenses include only tuition and fees required for
enrollment as well as course materials such as textbooks.
- Qualifying expenses do not include room and board, student activity fees, and
other expenses unrelated to an individual's academic course of instruction.
Lifetime Learning Credit - ANSWER✔✔ A nonrefundable credit equal to 20% of
the first $10,000 of qualified higher education tuition and fees paid during the year
on behalf of the taxpayer, his spouse, or his dependents.
In the fall of 2012, Erica went back to school to earn a masters degree in
psychology. She incurred $7,000.00 of qualified education expenses and her
modified AGI for the year was $40k. What is her lifetime learning credit? -
ANSWER✔✔ $1,400
The lifetime learning credit applies to almost any type of education and is
computed as 20% of expense up to $10k.
Disabled Access Credit - ANSWER✔✔ A non-refundable tax credit is available to
eligible small businesses for expenditures incurred to make existing business
facilities accessible to disabled individuals.
, The disabled access credit is equal to 50% of eligible expenditures that exceed
$250 but do not exceed $10,250. Therefore, the annual credit limitation is $5,000.
The basis of the property is reduced by the allowable credit.
Crane Corporation had 14 employees during the proceeding tax year and $2
million of gross receipts. During the current year, Crane installed concrete access
ramps at a total cost of $14,000. Is this eligible for the Disabled Access Credit? If
so how much? - ANSWER✔✔ Crane is an eligible small business because the
company had 30 or fewer full-time employees during the proceeding year even
though its gross receipt exceed the threshold amount of $1 million. Only $10,000
of eligible expenditures qualify for the credit, limiting the credit to $5,000
($10,000 x 0.50). The depreciation basis of the property is reduced by the credit
amount to $9,000 ($14,000-$5,000).
Tax credit for the elderly or disabled - ANSWER✔✔ A limited, personal, non-
refundable credit is provided for certain low-income elderly individuals who have
attained age 65 before the end of the tax year and individuals who retired because
of a permanent and total disability and who receive insubstantial Social Security
benefits.
The maximum credit is 15% of an initial amount of $5,000 ($7,500 for married
individuals filing jointly if both spouses are 65 or older).
Business Energy Credit - ANSWER✔✔ To encourage energy conservation
measures, additional credits are available to businesses that invest in energy-
conserving properties (for example, solar and geothermal property).
The Business energy credit for geothermal energy property is 10% of the property's
basis. The credit for solar energy property and qualified fuel cell property
purchased in tax years ending December 31, 2005 and before January 1, 2020 is
30% of the property's basis.
Answers With Verified Solutions Rated
A+ Newly Updated 2025
What are some of the most important personal credits? - ANSWER✔✔ - Child Tax
Credit
- Child and Dependent Care Credit
- Tax Credit for the Elderly and Disabled
- Adoption Credit
- American Opportunity Tax Credit
- Lifetime Learning Credit
Child Tax Credit - ANSWER✔✔ Taxpayers are allowed a non-refundable credit of
$2,000 for each qualifying child under the age of 17
Child & Dependent Care Credit - ANSWER✔✔ a tax credit that offsets your taxes
in a direct dollar-for-dollar manner for child and dependent care expenses
The maximum amount of child and dependent care expenses that qualify for the
credit is $3,000 for one qualifying individual and $6,000 for two or more
individuals.
Howard and Loni are married, file a joint return, and have two children, aged 9 and
11. Their combined AGI is $45k. They incur $5k of child-care expenses during the
current year. What is their child and dependent care credit? - ANSWER✔✔ $1k
$5000 spent ($6k is the limit for two or more children) x 20%
,Adoption Credit - ANSWER✔✔ A nonrefundable credit is allowed for qualified
adoption expenses. The amount of the credit in 2019 is $14,080, including a child
with special needs and generally is allowable in the year the adoption is finalized
American Opportunity Tax Credit (AOTC) - ANSWER✔✔ - Applies to each
student
- Taxpayers are allowed up to a $2,500 credit for tuition and related expenses paid
during the taxable year for each qualified student.
- Qualified tuition and related expenses include only tuition and fees required for
enrollment as well as course materials such as textbooks.
- Qualifying expenses do not include room and board, student activity fees, and
other expenses unrelated to an individual's academic course of instruction.
Lifetime Learning Credit - ANSWER✔✔ A nonrefundable credit equal to 20% of
the first $10,000 of qualified higher education tuition and fees paid during the year
on behalf of the taxpayer, his spouse, or his dependents.
In the fall of 2012, Erica went back to school to earn a masters degree in
psychology. She incurred $7,000.00 of qualified education expenses and her
modified AGI for the year was $40k. What is her lifetime learning credit? -
ANSWER✔✔ $1,400
The lifetime learning credit applies to almost any type of education and is
computed as 20% of expense up to $10k.
Disabled Access Credit - ANSWER✔✔ A non-refundable tax credit is available to
eligible small businesses for expenditures incurred to make existing business
facilities accessible to disabled individuals.
, The disabled access credit is equal to 50% of eligible expenditures that exceed
$250 but do not exceed $10,250. Therefore, the annual credit limitation is $5,000.
The basis of the property is reduced by the allowable credit.
Crane Corporation had 14 employees during the proceeding tax year and $2
million of gross receipts. During the current year, Crane installed concrete access
ramps at a total cost of $14,000. Is this eligible for the Disabled Access Credit? If
so how much? - ANSWER✔✔ Crane is an eligible small business because the
company had 30 or fewer full-time employees during the proceeding year even
though its gross receipt exceed the threshold amount of $1 million. Only $10,000
of eligible expenditures qualify for the credit, limiting the credit to $5,000
($10,000 x 0.50). The depreciation basis of the property is reduced by the credit
amount to $9,000 ($14,000-$5,000).
Tax credit for the elderly or disabled - ANSWER✔✔ A limited, personal, non-
refundable credit is provided for certain low-income elderly individuals who have
attained age 65 before the end of the tax year and individuals who retired because
of a permanent and total disability and who receive insubstantial Social Security
benefits.
The maximum credit is 15% of an initial amount of $5,000 ($7,500 for married
individuals filing jointly if both spouses are 65 or older).
Business Energy Credit - ANSWER✔✔ To encourage energy conservation
measures, additional credits are available to businesses that invest in energy-
conserving properties (for example, solar and geothermal property).
The Business energy credit for geothermal energy property is 10% of the property's
basis. The credit for solar energy property and qualified fuel cell property
purchased in tax years ending December 31, 2005 and before January 1, 2020 is
30% of the property's basis.
