STU5 Flashcards
What is the Child and Dependent Care Credit?
A nonrefundable tax credit is allowed for child and dependent care expenses incurred to enable the taxpayer to be gainfully employed. To qualify, the taxpayer must provide more than half the cost of maintaining a household for a dependent under age 13 or an incapacitated spouse or dependent. The maximum credit is equal to 35% of up to $3,000 of child and dependent care expenses for one qualifying individual ($6,000 for two or more individuals).
What is the amount of the American Opportunity Credit that the taxpayer may use in 2014?
The American Opportunity Credit allows taxpayers a 100% credit for the first $2,000 of tuition expenses and a 25% credit for the second $2,000 of tuition expenses. The credit is reduced subject to income limits. The phaseout range begins when AGI exceeds $160,000 for joint filers in 2014.
How are casualty losses deducted?
Only casualty losses in excess of 10% of AGI may be deducted after applying the $100 floor. Generally, casualty losses are deductible to the extent of the lesser of the decline in FMV or adjusted basis (less insurance reimbursements) due to the event.
How does a taxpayer qualify for the Child and Dependent Care Credit on a joint return?
A nonrefundable tax credit is allowed for child and dependent care expenses incurred to enable the taxpayer to be gainfully employed. To qualify, the taxpayer must provide more than half the cost of maintaining a household for a dependent under age 13 or an incapacitated spouse or dependent. The maximum credit is equal to 35% of up to $3,000 of child and dependent care expenses for one qualifying individual ($6,000 for two or more individuals). The credit amount is not eliminated when AGI exceeds $15,000, only phased down from 35% to 20% in increments of 1% for each $2,000 AGI exceeds $15,000.
What is the amount may be claimed as a Work Opportunity Tax Credit?
The amount of the Work Opportunity Tax Credit is equal to 40% of the first $6,000 of wages paid to a qualified employee in his or her first year of service. The employee is paid $6,500, so the credit is limited to $2,400 ($6,000 × 40%). To be eligible for the Work Opportunity Tax Credit, the employee must have completed a minimum of 120 hours of service. If the employee meets or exceeds the 120-hour minimum requirement but does not perform 400 or more hours of service, the employer is entitled to a credit of 25%. For employees performing 400 or more hours of service, the appropriate percentage is 40%.
Does the cost of getting a qualifying person from the home to the care location and back qualify as work-related child and dependent care expenses for purposes of the Child and Dependent Care Credit?
Employment-related expenses are paid for household services and for the care of a qualifying individual. Expenses are only classified as work-related if they are incurred to enable the taxpayer to be gainfully employed. The cost of transporting a qualifying individual to a place where care is provided is not considered to be incurred for the individual’s care.
What amount of the real estate rental activity loss is deductible?
The amount of a loss attributable to a person’s passive activities is allowable as a deduction or credit only against, and to the extent of, gross income or tax attributable to those passive activities. All rental activity is passive, but a person who actively participates in a rental real estate activity is entitled to deduct up to $25,000 of losses from the passive activity from other than passive income. However, this exception of the general passive activity loss limitation rule is completely phased out when the taxpayer has modified adjusted gross income of at least $150,000.
How is the child care credit calculated?
A credit equal to the applicable percentage of employment-related expenses is allowed. The applicable percentage is 35%, reduced (but not below 20%) by one percentage point for each $2,000 (or fraction thereof) by which adjusted gross income exceeds 15,000. The amount by which to reduce the applicable percentage is calculated by dividing 15,000 by 2,000, which is equal to 7.5, and must be rounded up to 8. Thus, the applicable percentage is 27% (35% – 8%) apply the credit up to the expenses paid less the excludable employer dependent-related expenses.
Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be
Any contributions that exceed the 50% limitation may be carried over and deducted in the subsequent 5 years
