Tax Credits

Question 1

Adoption Expense Credit amount and eligibility

Answer 1

$15,950

Phased out for MAGI between
$239,230 - $279,230

Less than age 18 or physically or mentally handicapped

Question 2

Child Tax Credit

Answer 2

Partially Refundable credit if $2,000 per child under age 17

$1,600 of it is refundable

AGI Phaseout $400k MFJ and $200k all others

Question 3

Qualifying Child for Child Tax Credit

Answer 3

Under age 17

Didn’t provide over half of his support for tax year

Lived w/ tax payer more than half the year

US Citizen, US National, Or US Resident

Son, Daughter, stepchild, foster child, brother, sister, step sibling, half siblings, grandchild

Question 4

Qualifying Dependent Tax Credit

Answer 4

$500 Non-refundable credit

Social Security number not required

Qualifying relatives AND qualifying children age 17 and over are eligible

Question 5

Child & Dependent Care credit

Answer 5

20% (usually) of expenses paid for care of:

- Dependent under 13    - or Spouse/dependent w/ a handicap

Question 6

Child & Dependent Care credit: Expenses considered amount/limit?

Answer 6

Lesser of actual costs or $3,000 for one qualified individual, and $6,000 for 2 or more qualified individual

Or

Earned income of lower earning spouse

Question 7

Kiddie Tax Definition

Answer 7

Unearned income of dependent kid under age 19 living w/ parent

Or

Under age 24 and a full-time student

Question 8

Kiddie Tax Rates

Answer 8

Unearned income excess of $2,500 is taxed at parent’s rate

Unearned income
$1,250 - $2,500 taxed at kid’s rate

Earned income above standard deduction is taxed at kid’s rate

Apply standard deduction for dependent: Greater of $1,250 or Earned Income + $400 (limited to $13,850)

Question 9

Kiddie Tax: Ben is 10yr old, had $2,700 Unearned income and No Earned Income

Answer 9

First $1,250 is covered by Ben’s standard deduction

Next $1,250 is taxed at Ben’s rate

The last $200 is taxed at parent’s rate

Question 10

Jordan, age 7 has unearned income of $4,000 and earned income of $1,000. How much is taxed at parent’s rate?

Answer 10

$4,000 - $2,500 = $1,500

It’s the amount above the $2,500 amount for kid rate

Question 11

Jordan, age 7 has unearned income of $4,000 and Earned income of $1,000. How much is her Standard Deduction?

Answer 11

Greater of $1,250 or
Earned Income + $400

$1,000 + $400= $1,400

Question 12

AMT Formula

Answer 12

Regular Taxable Income
+/- Adjustments
+ Preferences
LESS AMT Exemptions
- $126,500 MFJ
- $81,300 Single, HOH
- $63,250 MFS

Question 13

AMT Tax Rates

Answer 13

26% for first $220,700 MFJ of taxable income subject to AMT

28% on income excess $220,700 MFJ;
$110,350 Single

Question 14

AMT Adjustments Examples

Answer 14

Accelerated depreciation for real & personal property

Standard deduction if itemized deductions aren’t used

State, Local, Property taxes

Incentive stock options
- Positive at Exercise
- Negative at Sale

Question 15

AMT Preference Items

Answer 15

Percentage Depletion

Intangible drilling costs

Interest on Private Activity Bonds

Question 16

Hobby Losses

Answer 16

When NO profit motive, ALL Hobby income must be included in gross income

Hobby Expenses NOT Deductible

No Profit in 3 out of 5 years = presumed a hobby