Question 1

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

Accepted Answer

The answer of Which of the following statements is not...

Question 2

The maximum adoption credit is 50% of all qualified expenses.

Accepted Answer

The maximum adoption credit is not based on a percentage of qualified expenses but is a fixed amount per child, which can be adjusted annually for inflation. For 2021, for example, the maximum adoption credit was up to $14,440 per child.

Question 3

Kobe is a single dad with two dependent children,Lizzie,age 7 and Leslie,age 3.He has AGI of $51,000 and paid $6,300 to a qualified day care center.What amount of credit can Kobe receive for the child and dependent care credit?

Accepted Answer

The answer of Kobe is a single dad with two...

Question 4

Tai and Song are ages 69 and 59,respectively,and file a joint return.They have AGI of $20,000 and received $2,000 in nontaxable social security benefits.How much can Tai and Song take as a credit for the elderly or the disabled?

Accepted Answer

The answer of Tai and Song are ages 69 and...

Question 5

DJ and Nicolette paid $1,600 in qualifying expenses for their daughter Nicole to attend the University of Nevada.Nicole is a sophomore.DJ and Nicolette's AGI is $175,000.What is their maximum allowable American opportunity tax credit after the credit phase-out based on AGI is taken into account?

Accepted Answer

The American Opportunity Tax Credit offers a maximum credit of $2,500 per eligible student, which is calculated as 100% of the first $2,000 of qualifying expenses, plus 25% of the next $2,000. However, for married couples filing jointly, the credit begins to phase out at an AGI of $160,000 and is completely phased out at $180,000. With an AGI of $175,000, DJ and Nicolette are within the phase-out range, reducing their maximum credit. Given the phase-out, their maximum allowable credit is reduced, but not to $0. The exact phase-out calculation isn't provided here, but the correct answer based on the options given and understanding of the tax credit's phase-out rules is $400. This suggests a significant reduction due to their AGI but still allows for some credit.

Question 6

Joseph paid $1,750 in qualifying expenses for his daughter who attended a community college.How much is Joseph's lifetime learning credit without regard to AGI limitations or other credits?

Accepted Answer

The answer of Joseph paid $1,750 in qualifying expenses for...

Question 7

A qualifying individual for the purposes of the child and dependent care expenses credit includes all of the following except:

Accepted Answer

A dependent child who is 17 years old and attends school full time is not eligible for the child and dependent care expenses credit. The credit only applies to dependents under the age of 13 or dependents or spouses who are mentally or physically incapable of caring for themselves.

Question 8

Kyle and Alyssa paid $1,000 and $2,000 in qualifying expenses for their two daughters Jane and Jill,respectively,to attend the University of California.Jane is a sophomore and Jill is a freshman.Kyle and Alyssa's AGI is $132,000 and they file a joint return.What is their allowable American opportunity tax credit after the credit phase-out based on AGI is taken into account?

Accepted Answer

The American Opportunity Tax Credit (AOTC) allows up to $2,500 per eligible student. For Jane, they can claim $1,000 (100% of the first $2,000 of expenses) and for Jill, they can claim $2,000 (100% of the first $2,000 of expenses). Their AGI of $132,000 is below the phase-out threshold for joint filers, so the full credit of $3,000 is allowable.

Question 9

Which of the following statements is not true regarding the credit for the elderly or the disabled?

Accepted Answer

The base amount for the credit calculation for joint returns is not $5,000, it is $7,500. The other statements are true regarding the credit for the elderly or the disabled.

Question 10

Sam paid the following expenses during October 2014 for his son Aaron's spring 2015 college expenses: Spring 2015 semester begins in January 2015:  In addition,Aaron's uncle paid $500 for college fees on behalf of Aaron directly to the college.Aaron is claimed as Sam's dependent on his tax return.How much of the paid expenses qualify for purposes of the education credit deduction for Sam in 2014?

Accepted Answer

The answer of Sam paid the following expenses during October...

Question 11

April and Joey are both 74 years old and received $1,500 in nontaxable social security benefits.Their AGI for the year was $18,000.How much can April and Joey claim as a credit for the elderly or the disabled?

Accepted Answer

The credit for the elderly or the disabled is available to individuals who are 65 or older, or who are permanently and totally disabled. The amount of the credit depends on filing status, age, income, and the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income received. Given April and Joey's age (both 74) and their AGI ($18,000) along with their nontaxable social security benefits ($1,500), the maximum credit they could claim, based on the IRS guidelines and the standard limitations for their situation, would likely be the lowest amount listed among the options provided, which is $300. The exact calculation would depend on the specifics of their income and deductions, but none of the higher amounts listed would typically be available for individuals with their financial profile.

Question 12

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 credit of up to $2,500 per eligible student, based on qualified expenses paid during the first four years of college. Since Cash is in his first year of college and Warren and Erika paid $9,300 in qualified expenses, they are eligible for the maximum credit of $2,500.

Question 13

Which of the following statements is not true regarding the credit for the elderly or the disabled?

Accepted Answer

The answer of Which of the following statements is not...

Question 14

Sean and Jenny are married,file a joint return and have two dependent children,Blake,age 9 and Jake,age 5.Sean has earned income of $72,000.Jenny was a full-time student (for nine months)with no income.They paid a qualified day care center $7,000.What amount of child and dependent care credit can Sean and Jenny receive?

Accepted Answer

The answer of Sean and Jenny are married,file a joint...

Question 15

Which of the following statements is true about education credits?

Accepted Answer

The lifetime learning credit is indeed subject to income limitations, which means that as a taxpayer's modified adjusted gross income (AGI) increases, the credit amount they are eligible for may decrease, and it may phase out entirely beyond certain AGI thresholds. These thresholds can vary by tax year.

Question 16

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

Accepted Answer

This statement is not true because payments made using borrowed funds can be considered qualified expenses as long as the expenses are paid in the year they were incurred and the borrower is legally obligated to repay the loan.

Question 17

Which of the following statements is not true with regard to the child and dependent care expense credit?

Accepted Answer

Married taxpayers may file either jointly or separately and still claim the child and dependent care expense credit.

Question 18

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 the foreign tax credit, we first need to determine how much of Gina's U.S. tax liability is attributable to her foreign income. We do this by multiplying her total U.S. tax liability ($3,610) by the ratio of her foreign income ($6,000) to her total income ($39,000):

$3,610 x ($6,000/$39,000) = $555.38

This means that $555.38 of Gina's U.S. tax liability is attributable to her foreign income. Now we compare this amount to the foreign income taxes she paid ($1,200). If the foreign income taxes are greater than the U.S. tax liability attributable to the foreign income, then the foreign tax credit is limited to the amount of U.S. tax liability attributable to the foreign income ($555.38 in this case). If the foreign income taxes are less than the U.S. tax liability attributable to the foreign income, then the foreign tax credit is limited to the amount of foreign income taxes paid.

In this case, since $1,200 is greater than $555.38, the foreign tax credit is limited to $555.38. Therefore, the answer is C, $555.

Question 19

Kylie is a single mom with two dependent children,Tanner,age 7 and Olivia,age 11.She has AGI of $38,000 and paid $5,300 to a qualified day care center for the two children.What amount of credit can Kylie receive for the child and dependent care credit?

Accepted Answer

To calculate the child and dependent care credit, Kylie needs to multiply her eligible expenses by a percentage based on her AGI. The maximum eligible expenses for one child are $3,000 and $6,000 for two or more children. In this case, Kylie has two children, so she can use up to $6,000 of eligible expenses. Since she paid $5,300 to a qualified day care center, that is the eligible expense amount she will use.

To calculate the credit, Kylie needs to multiply her eligible expenses by a percentage based on her AGI. For an AGI between $35,000 and $39,000, the percentage is 20%. Therefore, Kylie can receive a credit of:

$5,300 x 20% = $1,060

Since the maximum credit for two or more children is $1,050, Kylie will receive the full $1,050 credit.

However, there is also a provision that allows for a percentage of eligible expenses to be nonrefundable. In this case, 35% of the eligible expenses is nonrefundable. So, 35% of $5,300 is $1,855.

To determine the final credit amount, Kylie needs to compare her AGI to a threshold amount of $15,000. For every $2,000 over the threshold, the credit is reduced by 1%. Kylie's AGI is $38,000, which is $23,000 over the threshold. So, her credit is reduced by 11.5% (23 divided by 2).

To calculate the final credit amount, Kylie needs to subtract the nonrefundable percentage from the eligible expenses, then multiply the result by the percentage based on her reduced credit rate.

($5,300 - $1,855) x 8.5% = $271

Therefore, Kylie can receive a credit of $1,050, but with the nonrefundable percentage and reduced credit rate factored in, her final credit amount is:

$1,050 - $271 = $779

Therefore, the best choice is C, $1,219.

Question 20

The earned income credit (EIC)is ONLY available for taxpayers with children.

Accepted Answer

This statement is false. The earned income credit (EIC) is available for taxpayers with or without children, although the credit amount can vary depending on the number of qualifying children. In fact, taxpayers without children can also be eligible for the EIC.

Quiz 9: Tax Credits

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

The maximum adoption credit is 50% of all qualified expenses.

Kobe is a single dad with two dependent children,Lizzie,age 7 and Leslie,age 3.He has AGI of $51,000 and paid $6,300 to a qualified day care center.What amount of credit can Kobe receive for the child and dependent care credit?

Tai and Song are ages 69 and 59,respectively,and file a joint return.They have AGI of $20,000 and received $2,000 in nontaxable social security benefits.How much can Tai and Song take as a credit for the elderly or the disabled?

DJ and Nicolette paid $1,600 in qualifying expenses for their daughter Nicole to attend the University of Nevada.Nicole is a sophomore.DJ and Nicolette's AGI is $175,000.What is their maximum allowable American opportunity tax credit after the credit phase-out based on AGI is taken into account?

Joseph paid $1,750 in qualifying expenses for his daughter who attended a community college.How much is Joseph's lifetime learning credit without regard to AGI limitations or other credits?

A qualifying individual for the purposes of the child and dependent care expenses credit includes all of the following except:

Which of the following statements is not true regarding the credit for the elderly or the disabled?

April and Joey are both 74 years old and received $1,500 in nontaxable social security benefits.Their AGI for the year was $18,000.How much can April and Joey claim as a credit for the elderly or the disabled?

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?

Which of the following statements is not true regarding the credit for the elderly or the disabled?

Which of the following statements is true about education credits?

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

Which of the following statements is not true with regard to the child and dependent care expense credit?

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)

Kylie is a single mom with two dependent children,Tanner,age 7 and Olivia,age 11.She has AGI of $38,000 and paid $5,300 to a qualified day care center for the two children.What amount of credit can Kylie receive for the child and dependent care credit?

The earned income credit (EIC)is ONLY available for taxpayers with children.