Deck 7: Tax Credits

Question 1

The child tax credit is $2,000 per qualifying child unless it is phased out due to higher levels of parental income.

Answer 1

True

Question 2

The use of the earned income credit could result in a taxpayer receiving a refund even though he or she has not paid any income taxes.

Answer 2

True

Question 3

Alice is a single taxpayer with no dependents that has AGI of $11,200 in 2019. Alice is required to carry minimum essential coverage in 2019 or else pay additional tax (individual shared responsibility).

Answer 3

False

Question 4

Amounts paid to a relative generally do not qualify as child care expenses.

Question 5

Married taxpayers must generally file a joint tax return to claim the child and dependent care credit.

Question 6

The foreign tax credit applies only to foreign corporations.

Question 7

All taxpayers are required to have minimum essential health coverage in order to avoid the individual shared responsbility tax.

Question 8

An individual may claim both a credit and an exclusion from income in connection with the adoption of an eligible child, but may not claim both a credit and an exclusion for the same expense.

Question 9

Vicky is a single, 21-year-old, full-time student who purchased health care through the state health care exchange for the full year. Her part-time job pays her $12,000 in 2019. She files her own tax return but is claimed as a dependent by her parents. Vicky is eligible for the premium tax credit.

Question 10

To be eligible for the earned income credit for 2019, a taxpayer must have a "qualifying child."

Question 11

In determining the amount of the child and dependent care credit, there is a limit of $2,000 on the amount of qualified expenses for one dependent.

Question 12

A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.

Question 13

Curly and Rita are married, file a joint return, and have two dependent children, ages 11 and 13. Their AGI is $417,000. By how much is their child credit reduced in 2019?

A)$0
B)$1,150
C)$3,150
D)$850
E)$4,000

Question 14

After raising two children, Anh, a single 48-year-old, decided to go to college to earn her first college degree. She spent two years in community college and earned an associate's degree. In 2019, she is enrolled half-time at State University to earn a Bachelor's degree in Accounting and also works part-time. Anh is eligible for the American Opportunities tax credit.

Question 15

In 2019, the total expenses that can be taken as a credit for all tax years for adoption of a child without "special needs" are $10,000.

Question 16

Avery is a single, 26-year-old graduate student at State University with no children. She is a US citizen with a valid Social Security number. Her only income is from a part-time job on campus from which she earned wages of $6,000. Avery qualifies for the earned income credit.

Question 17

For 2019, the maximum amount of expenses that qualify for the child and dependent care credit is the same for three dependents as it is for two dependents.

Question 18

Denise is divorced and files a single tax return claiming her two children, ages 7 and 9, as dependents. Her AGI for 2019 is $81,500. Denise's child tax credit for 2019 is:

A)$0
B)$1,000
C)$1,000
D)$2,000
E)$4,000

Question 19

Taxpayers are required to wait until they file their tax return to receive the premium tax credit.

Question 20

The child tax credit is not available for children ages 17 and older.

Question 21

The American Opportunity tax credit

A)Is 50 percent of the first $1,200 of tuition and fees paid and 100 percent of the next $1,200.
B)Is available for 2 years of post-secondary education.
C)Is fully refundable even if the credit exceeds the tax liability.
D)Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents.

Question 22

To qualify for the additional child tax credit:

A)The typical child tax credit must be limited by tax liability.
B)The taxpayer must have earned income of over $2,500.
C)The taxpayer must have at least one qualifying child.
D)All of these are required to qualify for the additional child tax credit

Question 23

Bob and Carol file their tax returns using the married filing jointly status. Their AGI is $132,500. They have two children, ages 11 and 7. How much child tax credit can Bob and Carol claim for their two children?

A)$0
B)$2,000
C)$2,850
D)$4,000
E)None of the above is correct

Question 24

Which of the following tax credits is not available for the 2019 tax year?

A)Foreign tax credit
B)Earned income credit
C)Adoption credit
D)Child and dependent care credit
E)All of these are available credits

Question 25

Household income for purpose of the premium tax credit includes all of the following except:

A)AGI of the taxpayer
B)AGI of the taxpayer's dependents if required to file a return
C)Any tax-exempt income
D)Nontaxable Social Security benefits
E)All of these are included in household income

Question 26

Robert and Mary file a joint tax return for 2019 with adjusted gross income of $34,000. Robert and Mary earned income of $20,000 and $14,000, respectively, during 2019. In order for Mary to be gainfully employed, they pay the following child care expenses for their 4-year-old son, John: Union Day Care Center $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\$ 1,700$
Wilma, baby sitter (Robert's mother) $\quad$ $\quad$ $\quad$$\$ 1,000$ What is the amount of the child and dependent care credit they should report on their tax return for 2019 (assume no tax liability limitation)?

A)$270
B)$459
C)$675
D)$729
E)None of these

Question 27

In 2019, Alex has income from wages of $16,000, adjusted gross income of $18,000, and tax liability of $300 before the earned income credit. What is the amount of Alex's earned income credit for 2019, assuming he is single and his 5-year-old dependent son lives with him for the full year?

A)$0
B)$2,000
C)$3,461
D)$3,526
E)None of these

Question 28

Phillip and Naydeen Rivers are married with two dependent children. The family has household income of $40,160 in 2019. They paid $11,000 for health care for the year through the health care exchange. A designated silver plan would have cost $9,800. What is the Rivers' premium tax credit?

A)$0
B)$7,941
C)$8,033
D)$11,000
E)$9,800

Question 29

Jessica and Robert have two young children. They have $7,000 of qualified child care expenses and an AGI of $22,000 in 2019. What is their allowable child and dependent care credit considering their pre-credit tax liability?

A)$0
B)$1,860
C)$2,000
D)$6,000
E)$7,000

Question 30

Keith has a 2019 tax liability of $2,250 before taking into account his American Opportunity tax credit. He paid $2,600 in qualifying expenses, was a full-time student, was not claimed as a dependent on his parents' return, and his American Opportunity tax credit was not subject to phase-out. What is the amount of his American Opportunity tax credit allowed?

A)$0
B)$2,150
C)$2,250
D)$2,600
E)$4,000

Question 31

For the 2019 tax year, Sally, who is single, reported the following items of income: $$\begin{array} { l r } \text { Interest income } & \$ 600 \\\text { Wages } & \$ 4,100 \\\text { Earnings from self-employment } & \$ 3,000\end{array}$$ She maintains a household for herself and her 1-year-old son who qualifies as her dependent. What is the earned income credit available to her for 2019, using the tables?

A)$503
B)$1,369
C)$2,423
D)$529
E)None of these is correct

Question 32

Hal is enrolled for one class at a local community college; tuition cost him $190. Hal's AGI is $20,000. Before considering a limitation due to tax liability, Hal can take a lifetime learning credit of:

A)$0
B)$38
C)$100
D)$190
E)$250

Question 33

The child and dependent care provisions:

A)Apply only to children under age 15.
B)Are available only to single parents.
C)Are available for the care of spouses incapable of self-care.
D)Are allowed only for taxpayers earning less than $43,000.

Question 34

Which one of the following taxpayers qualify for the earned income credit in 2019?

A)A 70-year-old doctor whose practice had a net loss and who has an AGI of $5,000.
B)An 18-year-old college student who earns $8,000 at a part-time job.
C)A couple who have a combined AGI of $17,000 and three children but file separately.
D)A single, 31-year-old construction worker with $22,000 of AGI and two children.
E)None of these qualifies for the earned income credit.

Question 35

Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2019, Clark earned a salary of $32,000. He paid $3,600 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care. He had no other income or expenses during 2019. Before considering any limitation due to tax liability, how much can Clark claim as a child and dependent care credit in 2019?

A)$910
B)$1,300
C)$1,326
D)$5,100
E)None of these

Question 36

Steve goes to Tri-State University and pays $40,000 in tuition. Steve works to pay for his schooling and has an AGI of $37,000. How much is his American Opportunity tax credit?

A)$2,000
B)$2,500
C)$4,000
D)$1,000
E)He does not qualify for the American Opportunity tax credit.

Question 37

In 2019, the child tax credit available to married taxpayers filing jointly is phased out, beginning at:

A)$110,000
B)$200,000
C)$400,000
D)$406,750

Question 38

The earned income credit:

A)Must be calculated on earned income as well as adjusted gross income in some cases.
B)Cannot exceed the amount of the tax liability.
C)Is available only if the taxpayer has qualifying children.
D)Is available to married taxpayers who file separate returns.

Question 39

Which of the following is not a requirement to claim an earned income credit?

A)Social Security number
B)At least one child claimed as a dependent
C)At least $1 of earned income
D)US citizenship or resident alien status

Question 40

Caprice is a single 42-year-old with income of $14,000 in 2019. She lacked minimum essential coverage for 7 months in 2019. What is her individual shared responsibility payment amount?

A)$0
B)$405.44
C)$695.00
D)$50.00
E)None of these

Question 41

Jeff is a stay-at-home father who earns $600 from odd jobs and takes care of his daughter. His wife, Michelle, is the bread-winner and brings in $60,000 of income a year. In addition to the care provided by Jeff, Michelle pays $4,500 in child care.
In the current year, how much are Jeff and Michelle's qualifying expenses for the child and dependent care credit?

Question 42

Martin and Rachel are married and have a 3-year-old child. Martin is going to medical school full-time for 12 months of the year and Rachel earns $45,000. Their child is in day care so Martin can go to school while Rachel is at work. The cost of their day care is $10,000. What is their child and dependent care credit? Please show your calculations and explain.

Question 43

Maxine is a 29-year-old single mother. Her tax liability before any credits is $1,000 and her only credit is the earned income credit of $2,500. What is the amount of Maxine's refund? Explain.

Question 44

Carla and Bob finalized an adoption in 2019. Their adoption fees totaled $9,500. They have AGI of $220,160 for 2019. What is their adoption credit?

A)$8,075
B)$7,263
C)$9,500
D)$14,080

Question 45

What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim the earned income credit? Why is there an earned income credit in the law?

Question 46

Jeff and Geri are married and have AGI of $95,000 and three young children. Geri pays $6,000 a year to day care providers so she can teach a yoga class and do household errands. Geri earns $5,000 teaching the yoga class. How much child and dependent care credit can Jeff and Geri claim? Why?

Question 47

Taxpayer Q has net taxable income of $30,000 from Country Y which imposes a 40 percent income tax. In addition to the income from Country Y, taxpayer Q has net taxable income from US sources of $120,000, and US tax liability, before the foreign tax credit, of $30,290. What is the amount of Q's foreign tax credit?

A)$6,058
B)$8,350
C)$12,000
D)$30,290
E)None of these

Question 48

Jasmine is a single marketing manager with a college degree. She continually updates her marketing knowledge and gets fresh ideas by taking classes at the local community college. This year she spent $1,500 on course tuition and fees. If Jasmine has AGI of $60,000, how much lifetime learning credit can she claim on her tax return? Explain.

Question 49

Jim has foreign income. He earns $26,000 from Country A which taxes the income at a 20 percent rate. He also has income from Country B of $18,000. Country B taxes the $18,000 at a 10 percent rate. His US taxable income is $90,000, which includes the foreign income. His US income tax on all sources of income before credits is $19,000. What is his foreign tax credit?

A)$6,500
B)$7,000
C)$9,289
D)$19,000
E)Jim does not qualify for a foreign tax credit.

Question 50

Fletch and Cammie Gates are married with three dependent children and household income of $52,956 in 2019. The Gates purchased health care insurance on their state's exchange for total premiums of $6,800. A designated silver plan for their family in their state costs $9,700. Calculate the Gates' premium tax credit.

Question 51

Explain what type of educational expenses qualify for the American Opportunity tax credit and what type of educational expenses qualify for the lifetime learning credit.

Question 52

Marion has an 11-year-old daughter. Please calculate her child and dependent care credit prior to any tax liability limitation under these two alternatives:
a. Marion pays $4,000 a year in day care costs. Her salary is $32,000.
b. Marion pays $8,000 a year in day care costs. Her salary is $80,000.

Question 53

Richard has $30,000 of income from a country that imposes a 40-percent income tax and $30,000 of income from a country that imposes a 34 percent income tax. In addition to the foreign income, he has taxable income from US sources of $120,000 and a US tax liability, before credits, of $45,575. The amount of Richard's foreign tax credit is:

Question 54

Brad works at the local pizza shop as a delivery person. He is hoping to change to a position in the kitchen and takes a culinary course at the local community college for $1,400. Assuming he is eligible, Brad's lifetime learning credit is:

Question 55

Clark maintains a household for himself and his two dependent preschool children and files as head of household. For the year ended December 31, 2019, Clark earned a salary of $62,000. He paid $3,600 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care. He had no other income or expenses during 2019. His tax liability before any credits is $5,011. How much can Clark claim as a child and dependent care credit, child tax credit, and additional child tax credit in 2019?

Question 56

A tax credit is allowed for qualified adoption expenses paid by taxpayers:

A)And an additional credit is allowed for qualified adoption expenses paid for by taxpayers' employers.
B)And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers' employers.
C)And is available each year qualifying expenses are incurred.
D)And is not subject to a phase-out based on adjusted gross income.

Question 57

Taxpayers are allowed two tax breaks for adoption expenses. They are allowed: Qualified Expenses
Paid personally $\quad$ $\quad$ $\quad$ Paid by employer

A)Credit Credit
B)Exclusion Exclusion
C)Credit Exclusion
D)Exclusion Credit

Question 58

Calculate the total child tax credit and other dependent credit for the following taxpayers. Please show your work.
a. Ninfa is a single mother with 8-year-old and 9-year-old dependent sons and has $50,000 of AGI.
b. Sharon and Mark have one dependent 2-year-old child and $426,300 of AGI.
c. Carol is single and has one dependent 18-year-old son and $21,000 of AGI.

Question 59

In the case of the adoption of a child who is not a US citizen or resident of the United States, the credit for qualified adoption expenses is available:

A)In the first year the expenses are paid.
B)Each year expenses are paid.
C)In the last year expenses are paid.
D)In the year the adoption becomes final.

Question 60

Arthur is divorced with two dependent children, ages 8 and 13. His adjusted gross income is $28,000, and he incurs qualified child care expenses of $6,000, $3,000 for each child.
a.What is the amount of Arthur's qualified child care expenses after any limitation?
b.Calculate the amount of Arthur's child and dependent care credit before any tax liability limitation.

Question 61

In 2019, Erin purchased a solar system to generate electricity for her home, at a cost of $5,000.
a. How much is her tax credit in 2019?
b. If she had purchased a solar heating system for her swimming pool at a cost of $3,500, how much could she claim as a tax credit?
c. If she had purchased a $5,000 solar electric system and a $4,500 solar heating system for her principal home (not for the swimming pool), how much could she claim as a tax credit?
d. If she had purchased the electric system for her principal residence and the solar heating system for a second residence, how much could she claim as a tax credit?

Question 62

In 2019, Brady purchases a 2019 Nissan Leaf electric vehicle for his personal use. He is eligible to claim a credit of $7,500. He is in the 35 percent marginal tax bracket and his regular tax liability before credits is $14,800. What is the tax benefit Brady realizes from this purchase?

Question 63

Daddy Warbucks is in the process of adopting Annie from a New York orphanage. He pays $7,000 in 2018, and $7,500 in 2019. Daddy Warbucks' AGI for 2019 is $165,000.
​
a. How much is the adoption credit that Daddy Warbucks may claim for 2019 if the adoption becomes final in 2019?
b. How much is the adoption credit that Daddy Warbucks may claim for 2019 if the adoption becomes final in 2020?
c. How much is the adoption credit that Daddy Warbucks may claim for 2019 if the adoption falls through and is never finalized?

Question 64

Sheila and Jerry are married taxpayers with $600 of foreign tax withholding from the dividends in a mutual fund. They have enough foreign income from the mutual fund to claim the full $600 as a foreign tax credit. They are in the 35% tax bracket and they itemize deductions. Should they claim the foreign tax credit on the Form 1040 or a deduction for foreign taxes on their Schedule A? Why?

Question 65

Edward takes a job in Canada working for an automobile manufacturer. He spends all of 2019 in Canada, earns $130,000 in wages, and is a bona fide resident of that country. How much foreign income exclusion can Edward claim?

Question 66

What would generally reduce income taxes more: a $100 tax credit or a $100 tax deduction?