Chapter 2 Section 2: Tax Calculations and Credits Flashcards Preview

CPA: REG > Chapter 2 Section 2: Tax Calculations and Credits > Flashcards

Flashcards in Chapter 2 Section 2: Tax Calculations and Credits Deck (16):
1

Can personal tax credits give you a refund?

No. They reduce tax, but don't make it negative

2

What is the child and dependent care credit?
Who are the dependents that qualify?
What are the expenditure amounts?
Does school count?

20-35% of eligible expenditures for the care of dependents when you are working
Kids under 13, and age disabled dependent, disabled spouse
One dependent: 3000, two or more: 6000
School does not count

3

What is the credit for the elderly and/or permanently disabled?
What's the formula?

15% of eligible income for when you're over 65 or disabled.
Base: (5000 single 7500 joint)
- all social security
- 1/2 AGI over: single 7500 joint 1000
= balance
x 15%
= credit

4

What are the two education tax incentives?

American Opportunity Credit
Lifetime Learning Credit

5

Explain the American Opportunity Credit
How many years can you use it?
What is the dollar equivalent?
How many dependents can it be applied to?
Is there a phaseout?

Student's first four years of college
Max of 2500
Multiple dependents can use it
There is a phaseout

6

Explain the Lifetime Learning Credit
How many years can you use it?
What is the dollar equivalent
How many dependents can use it?
Is there a phaseout?

As many years as you want
Max of 2000
There is only one credit per family
There is a phaseout

7

What is the relationship between education credits and Coverdell?

They can both be used, but you can't use them for the same expenses

8

Can you use both education tax incentives in the same year?

Yes

9

Explain the adoption credit
What is the limit?
Is there a phaseout?
What are eligible expenses?

Limit is 13400 per child
There is a phaseout
All reasonable expenses, except medical, and not including expenses to adopt a stepchild

10

Explain the Retirement Savings Contribution Credit
Is it refundable?
Who is eligible?

No
Over 18, not a full-time student, not a dependent

11

Explain the foreign tax credit
What is the limit?
What do you do with the excess?

You can deduct any amount of foreign taxes paid, but the credit is limited to the lesser of:
foreign taxes paid or foreign taxable income/total income x US tax
Excess is carried back 1 or forward 10

12

What is the formula for the general business credit?

It can't exceed net income tax less the greater of:
25% of regular tax lia over 25000 or
tentative minimum tax for the year

13

Explain the work opportunity credit
What is the amount?
Who qualifies?

40% of first 6000 of first year's wages
Disabled, 18-24 year olds from poor families, Vietnam vets from poor areas, some food stamp recipients

14

Explain the child tax credit
What is the amount?
Who qualifies?

1000 per kid
Child must be under 17 and a citizen/resident of the US

15

Explain the earned income credit
Is it refundable?
Who gets it?

It is refundable
You need to make a tiny amount of money and be between 25 and 65

16

What do you do with withholding taxes?

They are a credit

Decks in CPA: REG Class (35):