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

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 $135,000 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, and for Jill, they can claim $2,000, totaling $3,000. Their AGI is below the phase-out threshold for joint filers, so no reduction is needed.

Question 3

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 4

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 5

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, but rather $7,500. This is because the base amount is calculated by adding together the individual base amounts for each spouse, which is $5,000 per spouse.

Question 6

The maximum contribution amount for the retirement savings contributions credit for each tax year is 20% of a taxpayer's AGI.

Accepted Answer

The maximum contribution amount for the retirement savings contributions credit is not based on a percentage of a taxpayer's AGI. The maximum contribution amount for the credit is based on a dollar amount set by the IRS each year.

Question 7

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

Kylie can receive a credit equal to 35% of the expenses paid for child care, up to a maximum of $3,000 for one qualifying individual (Olivia in this case) and $6,000 for two or more qualifying individuals (Olivia and Tanner). In this case, Kylie paid $5,300 in expenses for two qualifying individuals, so she can receive a credit of 35% x $5,300 = $1,855. However, the credit is limited to the amount of her earned income (AGI in this case), so she can only claim a credit of $38,000 x 0.20 = $7,600. Since the credit cannot exceed the smaller of the amount of qualifying expenses or her earned income limitation, Kylie can claim a credit of $1,855.

Question 8

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 9

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 10

Which of the following statements is true about education credits?

Accepted Answer

The lifetime learning credit may be limited by AGI levels and may completely phase out when modified AGI exceeds a certain amount (the amount depending on the tax year). Option A is incorrect because AGI limits affect eligibility and the amount of credit. Option B is incorrect because the same qualifying expenses cannot be used for both credits. Option C is incorrect because taking a tax-free distribution from a Coverdell ESA does not affect eligibility for the credits, but may affect the amount of the credit.

Question 11

The retirement savings contributions credit is available for head of household taxpayers only.

Accepted Answer

The retirement savings contributions credit is available for taxpayers who meet certain income requirements, regardless of their filing status.

Question 12

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 13

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

Accepted Answer

This statement is false. While having children is one of the criteria for qualifying for the EIC, taxpayers without children may also be eligible based on their income and other factors.

Question 14

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 15

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

Accepted Answer

Payments made using borrowed funds are considered qualified expenses for the purpose of calculating education credits. The source of the payment (whether it's out-of-pocket, from savings, or borrowed funds) does not affect its qualification.

Question 16

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...

Question 17

Sam paid the following expenses during October 2015 for his son Aaron's spring 2016 college expenses: Spring 2016 semester begins in January 2016:  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 2015?

Accepted Answer

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

Question 18

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 19

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 under the age of 13, an adult child who is incapable of caring for themselves, and a spouse who is incapable of caring for themselves are all qualifying individuals for the child and dependent care expenses credit. However, a dependent child who is 17 years old and attending school full-time does not qualify for the credit. The age limit for qualifying children is 12 years old or younger.

Question 20

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

Accepted Answer

Married taxpayers can file either joint or separate returns and still qualify for the child and dependent care expense credit.

Quiz 9: Tax Credits

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

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?

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

The maximum contribution amount for the retirement savings contributions credit for each tax year is 20% of a taxpayer's AGI.

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?

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?

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

Which of the following statements is true about education credits?

The retirement savings contributions credit is available for head of household taxpayers only.

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

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

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?

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

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?

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 with regard to the child and dependent care expense credit?