Individual Tax - Tax Calculations & Credits

Question 1

refundable Tax Credits

Answer 1

• child tax credit
• earned income
• W-2 withholdings
• excess Social Security withheld by two or more employers
• long-term unused minimum tax credits
• partial Hope scholarship credit
• and making work pay credit

Question 2

Child and Dependent Care Credit

Answer 2

Minimum and maximum credit (20 to 35 percent) and amount of eligible expenses for child and dependent care credit (one is $3,000; two or more, $6,000).

Question 3

Educational Tax Credits

Answer 3

American opportunity credit—per student = $2,500
100 percent of first $2,000 and 25 percent of next $2,000 for first four years.

Lifetime—$2,000; 20 percent of first $10,000 expenses. Can use both together but not for same expenses.

Question 4

Qualified Tuition Programs (QTP)

Answer 4

Program established and maintained by a state (or state agency or eligible educational institution); the taxpayer may purchase tuition credits or make cash contributions to an account on behalf of a beneficiary; distributions used for qualified education expenses (tuition, fees, books, supplies, equipment) are exempt from federal income taxation.

Question 5

Adoption Credit

Answer 5

Maximum amount per child is $13,190.
Phased-out AGI of $197,880–$237,880.
This credit is not refundable.

Question 6

Retirement Savings Contribution Credit

Answer 6

• nonrefundable, is available for contributions by taxpayers over 17 who are not full-time students and not dependents
• paid into a traditional or ROTH IRA, maximum amount $2,000. Phase-outs apply based on AGI.

Question 7

Foreign Tax Credit

Answer 7

can be used as itemized deduction in lieu of credit.

Question 8

General Business Credit (GBC)

Answer 8

Made up of many credits, limitation formula sometimes tested (note, only first $25,000 may be eliminated completely, remaining income can only be 75 percent eliminated by the GBC

Question 9

Child Tax Credit

Answer 9

$1,000 per “qualifying child” (dependent son or daughter or descendant of either, or stepchild or eligible foster child of taxpayer), not 17 by end of tax year,

phase out by $50 per $1,000 for AGI over MFJ $110,000, MFS $55,000, Unmarried $75,000.
Portion may be refundable.

Question 10

Earned Income Credit

Answer 10

• Refundable credit (most common question),
• taxpayer must have earned income
• one or more qualifying children to maximize
• a lesser credit available if TP or spouse is over 25 and less than 65 years of age

Question 11

Excess FICA (Social Security tax withheld)

Answer 11

Must have two or more employers (if only one employer, employer must refund excess) each withheld Social Security

normally limited after a certain wage, each acted independent of the other, treat the excess as a “withholding credit” when filing the tax return.