Question 1

Shawn and Dahlia are married;both work and have one qualifying child.They had AGI of $19,000.What is their Earned Income Credit?

Accepted Answer

To calculate the Earned Income Credit, we need to find their earned income, which is their AGI minus any non-taxable income like nontaxable social security benefits or tax-exempt interest. If we assume they have no non-taxable income, their earned income would be $19,000.

For a married couple with one qualifying child, the maximum Earned Income Credit for tax year 2020 is $3,584 with an earned income of $10,000 to $19,370. Since their earned income falls within this range, they would be eligible for the full credit.

The Earned Income Credit is based on a complex set of rules and factors, so it's always best to consult with a tax professional or use tax software to ensure accuracy.

Question 2

Debbie files as head of household and has AGI of $36,500.During the year,she contributed $1,000 to a 401(k).What amount of retirement savings contributions credit can Debbie take?

Accepted Answer

The retirement savings contributions credit is designed for lower to middle-income taxpayers who make contributions to qualified retirement accounts, like a 401(k). The credit amount is a percentage of the qualifying contribution amount, based on the filer's adjusted gross income (AGI). Given Debbie's AGI of $36,500 and her filing status as head of household, she falls within the income range that allows for a 10% credit rate on her $1,000 contribution to a 401(k), which equals a $100 credit.

Question 3

Julia and Omar are married and file a joint tax return.They have two dependent daughters,ages 14 and 18.If their AGI is $98,000,what amount of child tax credit can they claim?

Accepted Answer

The answer of Julia and Omar are married and file...

Question 4

Angelina is single and has modified AGI of $275,000.She adopted a boy from San Antonio,Texas,and incurred a total of $16,000 in qualified adoption expenses.What is the amount of adoption credit she can take?

Accepted Answer

The adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) above certain thresholds, and it is completely phased out for taxpayers with MAGI above a higher threshold. For the tax year in question, Angelina's MAGI of $275,000 exceeds the phase-out limit for the adoption credit, making her ineligible for the credit.

Question 5

Presley and Jake are married filing joint taxpayers.They have twin sons,ages 7.If their AGI is $116,950,what amount of child tax credit can they claim?

Accepted Answer

For the tax year 2023, the Child Tax Credit is $2,000 per qualifying child, but it begins to phase out for married couples filing jointly at an AGI of $400,000. Since Presley and Jake's AGI is $116,950, well below the phase-out threshold, they can claim the full credit amount. However, due to a misunderstanding in the question's phrasing or a mistake in the provided options, the correct calculation based on the given options and AGI is not directly applicable to the standard IRS guidelines for the Child Tax Credit. The most accurate answer based on standard tax rules and the provided options would be $2,000 per child, but given the options and the question's structure, the intended correct answer seems to be a mistake. Therefore, based on standard tax rules, they should be able to claim $2,000 per child, but the correct answer according to the options provided is not clear due to a possible error in the question setup.

Question 6

In which of the following situations would a taxpayer be better off to take the foreign taxes paid as an itemized deduction rather than as a foreign tax credit?

Accepted Answer

The taxpayer would be better off taking the foreign taxes paid as an itemized deduction rather than as a foreign tax credit when the foreign tax paid was a property tax. This is because the foreign tax credit is generally available for income taxes paid to a foreign country, not for property taxes. Property taxes can be itemized deductions if they are related to personal property, which could provide a greater benefit depending on the taxpayer's overall tax situation.

Question 7

After years of working with the orphanage and the government,Walt and Kim adopted a little girl from China.The adoption process,which became final in January 2017,incurred the following qualified adoption expenses.What amount of adoption credit can Walt and Kim claim and in what year? Assume there is no credit limitation due to their AGI amount. $\begin{array}{rrr}
2016 & \$ & 12,500 \
2017 & & 2,800
\end{array}$

Accepted Answer

The answer of After years of working with the orphanage...

Question 8

Which of the following statements regarding adoption credits is not true?

Accepted Answer

This statement is not true. Adoption of foreign country children does qualify for the adoption credit, as long as the adoption is final and the child is a U.S. citizen or resident. The other statements are true: there is a dollar limit to the maximum credit allowed per adopted child, Form 8839 must be filed to claim the credit, and adoption of a child of taxpayer's spouse does not qualify for the credit.

Question 9

Gina has $39,000 total taxable income,which includes $6,000 of taxable income from Argentina.She paid $1,200 in foreign income taxes and her U.S.tax liability is $3,610.Gina's foreign tax credit is: (Do not round interim calculations)

Accepted Answer

To calculate Gina's foreign tax credit, we need to determine the portion of her U.S. tax liability that is attributable to her foreign income.

First, we need to calculate the portion of her total income that is taxable in the U.S.:

$39,000 total income - $6,000 foreign income = $33,000 U.S. income

Next, we need to calculate the ratio of foreign income to total income:

$6,000 foreign income / $39,000 total income = 0.1538

This means that 15.38% of Gina's income is foreign income.

Now we can calculate the portion of her U.S. tax liability that is attributable to her foreign income:

0.1538 x $3,610 U.S. tax liability = $555

Finally, we can compare this amount to the foreign taxes that Gina actually paid:

$555 U.S. tax liability on foreign income - $1,200 foreign taxes paid = -$645

Since the foreign taxes paid ($1,200) are greater than the U.S. tax liability on foreign income ($555), Gina is eligible for a foreign tax credit of $555.

Question 10

Rudy and Rebecca have AGI of $156,000.They have twin daughters,Ashley and Amy,ages 5.What amount of child tax credit can they claim?

Accepted Answer

For the tax year 2022, the Child Tax Credit reverts to $2,000 per qualifying child, but the credit begins to phase out for taxpayers with adjusted gross income (AGI) over $400,000 for married filing jointly and $200,000 for all other filers. Since Rudy and Rebecca's AGI is $156,000, they are below the phase-out threshold and would normally be eligible for the full credit. However, the question does not provide the correct amount based on the information given, leading to confusion. Given the options provided, none accurately reflect the expected amount based on the standard tax guidelines for the Child Tax Credit for two children at $2,000 each, which would be $4,000 total, not listed among the options. Therefore, the confusion in the question's structure and the provided options leads to the conclusion that none of the given choices accurately represent the correct Child Tax Credit amount based on the standard guidelines and the information provided about Rudy and Rebecca's situation.

Question 11

Jesus and Mindy have modified AGI of $210,000,adopted a girl from Miami,Florida,and incurred a total of $18,000 in qualified adoption expenses.What is the amount of adoption credit they can claim in the current year? (Do not round interim calculations)

Accepted Answer

The adoption credit for 2020 is a maximum of $14,300 per child. Since Jesus and Mindy adopted one child, their credit would be limited to $14,300. However, the credit is also subject to a phase-out based on modified AGI. In 2020, the phase-out begins at $214,520 and is completely phased out at $254,520. Since their modified AGI is $210,000, they are within the phase-out range. To calculate the actual credit, you need to subtract their modified AGI from the top end of the phase-out range ($254,520) and divide the result by $1,000. This gives a reduction factor of 44.48%. So, the actual credit they can claim is $14,300 minus 44.48% of the excess over $214,520, which is ($210,000 - $214,520) x 44.48% = $11,378.

Question 12

Which of the account contributions qualify for the retirement savings contributions credit?

Accepted Answer

All of the mentioned account contributions - IRA, 401(k), and SEP - qualify for the retirement savings contributions credit. This credit is meant to incentivize low- to moderate-income individuals to save for retirement by offering a tax credit worth up to $2,000, depending on income and contribution levels. Therefore, if you are eligible for this credit, contributing to any of these accounts can potentially reduce your tax bill and increase your retirement savings.

Question 13

Warren and Erika paid $9,300 in qualified expenses for their son,Cash,to attend the University of Washington.Cash is in his first year of college and attended full-time.How much is Warren and Erika's American opportunity tax credit,without regard to any AGI limitation?

Accepted Answer

The American opportunity tax credit allows for a maximum credit of $2,500 per eligible student per year. Warren and Erika paid $9,300 in qualified education expenses, which meets the minimum requirement of $4,000 to receive the full credit. Therefore, they can claim the full credit of $2,500 for Cash's expenses.

Question 14

Waseem has $103,000 total taxable income,which includes $11,000 of taxable income from India.He paid $4,000 in foreign income taxes and his U.S.tax liability is $21,610.Waseem's foreign tax credit is: (Do not round interim calculations)

Accepted Answer

Waseem's foreign tax credit is calculated by multiplying the lesser of his foreign income tax or his U.S. tax liability by the ratio of his foreign income to his total taxable income.

First, we need to determine the lesser of his foreign income tax or his U.S. tax liability:

Lesser of foreign income tax or U.S. tax liability = min($4,000, $21,610) = $4,000

Next, we need to calculate the ratio of Waseem's foreign income to his total taxable income:

Foreign income ratio = $11,000 / $103,000 = 0.10679

Finally, we can calculate Waseem's foreign tax credit:

Foreign tax credit = $4,000 x 0.10679 = $427.16

However, we need to round the credit down to the nearest dollar, giving us a final answer of $427.

Therefore, the best choice is (C) $2,308.

Question 15

Which of the following statements regarding adoption credits is not true?

Accepted Answer

The statement that the adoption credit may be claimed regardless of the taxpayer's modified AGI amounts is not true. The credit begins to phase out for taxpayers with modified AGI over a certain threshold (which varies depending on the tax year).

Question 16

Dean and Sue are married filing jointly with AGI of $28,000.They made a $1,500 contribution to a qualified retirement plan.How much is their retirement savings contributions credit?

Accepted Answer

The answer of Dean and Sue are married filing jointly...

Question 17

Sandra is single and her son Julius is 12 years old.If her AGI is $79,000,what amount of child tax credit can Sandra claim?

Accepted Answer

The answer of Sandra is single and her son Julius...

Question 18

Max paid $2,500 in foreign income taxes to Peru.His total income was $65,000,which included $9,000 of foreign income.His U.S.tax liability is $17,750.How much can Max claim as foreign tax credit? (Do not round interim calculations. )

Accepted Answer

To calculate the foreign tax credit, Max must first determine his taxable income. His total income was $65,000, and he can exclude up to $105,900 of foreign earnings from U.S. taxation. Therefore, Max's taxable income is $65,000 - $105,900 = -$40,900, which means he has no U.S. tax liability on his foreign income.

However, Max can still claim a foreign tax credit for the $2,500 he paid in foreign income taxes to Peru. The foreign tax credit is calculated by multiplying the foreign tax paid by the ratio of Max's foreign income to his total income. In this case, Max's foreign income was $9,000 and his total income was $65,000, so the ratio is 9,000/65,000 = 0.1385.

Therefore, Max's foreign tax credit is $2,500 * 0.1385 = $346.25. However, there is a limitation on the foreign tax credit, which is the lesser of the foreign tax paid or the U.S. tax liability on the foreign income. In this case, Max's U.S. tax liability on his foreign income is $0, so the foreign tax credit is limited to the amount of foreign tax paid, which is $2,500. However, Max can carry forward any excess foreign tax credits to future tax years.

So, the correct answer is A) $2,458.

Question 19

Which of the following conditions must be met for a taxpayer to be able to claim the foreign tax credit without filing Form 1116?

Accepted Answer

The answer of Which of the following conditions must be...

Question 20

Tina has $93,000 total taxable income,which includes $18,000 of taxable income from Japan.She paid $2,200 in foreign income taxes and her U.S.tax liability is $19,610.Tina's foreign tax credit is: (Do not round interim calculations)

Accepted Answer

Tina's foreign tax credit is limited to the U.S. tax liability on her foreign income. To calculate this, divide the foreign income ($18,000) by the total taxable income ($93,000), and then multiply by the total U.S. tax liability ($19,610). This gives ($18,000 / $93,000) * $19,610 = $3,795 as the limit. Since she paid $2,200 in foreign taxes, which is less than the limit, her foreign tax credit is $2,200.

Quiz 9: Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Shawn and Dahlia are married;both work and have one qualifying child.They had AGI of $19,000.What is their Earned Income Credit?

Debbie files as head of household and has AGI of $36,500.During the year,she contributed $1,000 to a 401(k) .What amount of retirement savings contributions credit can Debbie take?

Julia and Omar are married and file a joint tax return.They have two dependent daughters,ages 14 and 18.If their AGI is $98,000,what amount of child tax credit can they claim?

Angelina is single and has modified AGI of $275,000.She adopted a boy from San Antonio,Texas,and incurred a total of $16,000 in qualified adoption expenses.What is the amount of adoption credit she can take?

Presley and Jake are married filing joint taxpayers.They have twin sons,ages 7.If their AGI is $116,950,what amount of child tax credit can they claim?

In which of the following situations would a taxpayer be better off to take the foreign taxes paid as an itemized deduction rather than as a foreign tax credit?

Which of the following statements regarding adoption credits is not true?

Gina has $39,000 total taxable income,which includes $6,000 of taxable income from Argentina.She paid $1,200 in foreign income taxes and her U.S.tax liability is $3,610.Gina's foreign tax credit is: (Do not round interim calculations)

Rudy and Rebecca have AGI of $156,000.They have twin daughters,Ashley and Amy,ages 5.What amount of child tax credit can they claim?

Jesus and Mindy have modified AGI of $210,000,adopted a girl from Miami,Florida,and incurred a total of $18,000 in qualified adoption expenses.What is the amount of adoption credit they can claim in the current year? (Do not round interim calculations)

Which of the account contributions qualify for the retirement savings contributions credit?

Warren and Erika paid $9,300 in qualified expenses for their son,Cash,to attend the University of Washington.Cash is in his first year of college and attended full-time.How much is Warren and Erika's American opportunity tax credit,without regard to any AGI limitation?

Waseem has $103,000 total taxable income,which includes $11,000 of taxable income from India.He paid $4,000 in foreign income taxes and his U.S.tax liability is $21,610.Waseem's foreign tax credit is: (Do not round interim calculations)

Which of the following statements regarding adoption credits is not true?

Dean and Sue are married filing jointly with AGI of $28,000.They made a $1,500 contribution to a qualified retirement plan.How much is their retirement savings contributions credit?

Sandra is single and her son Julius is 12 years old.If her AGI is $79,000,what amount of child tax credit can Sandra claim?

Max paid $2,500 in foreign income taxes to Peru.His total income was $65,000,which included $9,000 of foreign income.His U.S.tax liability is $17,750.How much can Max claim as foreign tax credit? (Do not round interim calculations. )

Which of the following conditions must be met for a taxpayer to be able to claim the foreign tax credit without filing Form 1116?

Tina has $93,000 total taxable income,which includes $18,000 of taxable income from Japan.She paid $2,200 in foreign income taxes and her U.S.tax liability is $19,610.Tina's foreign tax credit is: (Do not round interim calculations)