Tax Computations & Tax Credit
Questions And Answers With Verified
Solutions Already Passed!!!
Tax Computation - ANSWER✔✔ Tax=Taxable income * Tax rate
Note: Tax rate is generally given on the exam
Tax Credits - ANSWER✔✔ reduce tax liability dollar for dollar
Refundable Credits
'WE ACE' - ANSWER✔✔ Can reduce tax due below zero and result in a refund.
- Withholding taxes
- Earned income credit
- American Opportunity Credit (40% refundable)
- Child tax credit (up to $1500 is refundable)
- Excess Social Security paid
Nonrefundable Credits
'CELL GRAF' - ANSWER✔✔ - Child & Dependent Care credit
- Elderly or Permanently Disabled credit
- Lifetime Learning Credit
- Longterm unused minimum tax credit
- General business credit
- Retirement plan contribution credit
- Adoption credit
- Foreign tax credit
, Child Tax Credit (CTC) - ANSWER✔✔ - Credit of $2000 for Each Qualifying
child Under Age 17
- Phase out: Credit reduced by $50 for each $1,000 by which AGI exceeds
$400,000 for MFJ or $200,000 for all other
- Partially Refundable
- Non-child dependent credit of $500 for each dependent who is Not a Qualifying
child under Age 17 (subject to same AGI phaseout) and is Not refundable
American Opportunity Credit - ANSWER✔✔ a tax credit of up to $2,500 (100%
of 1st $2,000 plus 25% the next $2,000 of qualified expenses) per year per student
for qualified education expenses during the first 4 years of college
- Partially Refundable (40%)
- Multiple kids allowed Each Year
Earned Income Tax Credit - ANSWER✔✔ Also known as the EITC, a refundable
federal income tax credit for low- to moderate-income working individuals and
families, even if they did not earn enough money to be required to file a tax return.
- Taxpayer must live in the US for more than half the taxable year & meet certain
low income thresholds & other requirements
- Max credit is 7.65% to 45% of earned income, depends on filing status & number
of dependents (having zero dependent does not preclude claiming EITC)
*Note: cannot be claimed if taxpayer has Investment income in Excess of $11,000
(2023)
Child and Dependent Care Credit - ANSWER✔✔ A nonrefundable tax credit of
20-35% of employment-related child and dependent care expenses for amounts of
up to $3,000 (1 dependent) or $6,000 (2+ dependents), available to individuals who
Questions And Answers With Verified
Solutions Already Passed!!!
Tax Computation - ANSWER✔✔ Tax=Taxable income * Tax rate
Note: Tax rate is generally given on the exam
Tax Credits - ANSWER✔✔ reduce tax liability dollar for dollar
Refundable Credits
'WE ACE' - ANSWER✔✔ Can reduce tax due below zero and result in a refund.
- Withholding taxes
- Earned income credit
- American Opportunity Credit (40% refundable)
- Child tax credit (up to $1500 is refundable)
- Excess Social Security paid
Nonrefundable Credits
'CELL GRAF' - ANSWER✔✔ - Child & Dependent Care credit
- Elderly or Permanently Disabled credit
- Lifetime Learning Credit
- Longterm unused minimum tax credit
- General business credit
- Retirement plan contribution credit
- Adoption credit
- Foreign tax credit
, Child Tax Credit (CTC) - ANSWER✔✔ - Credit of $2000 for Each Qualifying
child Under Age 17
- Phase out: Credit reduced by $50 for each $1,000 by which AGI exceeds
$400,000 for MFJ or $200,000 for all other
- Partially Refundable
- Non-child dependent credit of $500 for each dependent who is Not a Qualifying
child under Age 17 (subject to same AGI phaseout) and is Not refundable
American Opportunity Credit - ANSWER✔✔ a tax credit of up to $2,500 (100%
of 1st $2,000 plus 25% the next $2,000 of qualified expenses) per year per student
for qualified education expenses during the first 4 years of college
- Partially Refundable (40%)
- Multiple kids allowed Each Year
Earned Income Tax Credit - ANSWER✔✔ Also known as the EITC, a refundable
federal income tax credit for low- to moderate-income working individuals and
families, even if they did not earn enough money to be required to file a tax return.
- Taxpayer must live in the US for more than half the taxable year & meet certain
low income thresholds & other requirements
- Max credit is 7.65% to 45% of earned income, depends on filing status & number
of dependents (having zero dependent does not preclude claiming EITC)
*Note: cannot be claimed if taxpayer has Investment income in Excess of $11,000
(2023)
Child and Dependent Care Credit - ANSWER✔✔ A nonrefundable tax credit of
20-35% of employment-related child and dependent care expenses for amounts of
up to $3,000 (1 dependent) or $6,000 (2+ dependents), available to individuals who
