Question 1

Discuss the limitations of the lifetime learning credit. Briefly explain how AGI affects the amount of credit available.

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Question 2

Taxpayers can claim a child tax credit for each qualifying child. How is a qualifying child defined?

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Question 3

What are the requirements that the taxpayer must meet to receive a tax credit for child and dependent care expenses? Briefly discuss.

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Question 4

What is the difference between a refundable tax credit and a nonrefundable tax credit? Use at least one example of each type of credit in your answer.

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Question 5

Briefly explain how to calculate the child and dependent care credit and how the calculation for the credit is affected if the taxpayer's spouse does not work but is a full-time student instead.

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Question 6

What is the definition of qualifying child for purposes of the earned income credit?

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Question 7

Brooke is single with earned income of $19,354 and one qualifying child. Calculate Brooke's earned income credit using the EIC formula. (Round your answer to the nearest dollar)

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Question 8

Name the two credits that are available as education credits and briefly discuss the criteria to claim the credits.

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Question 9

Tyson is single and cannot be claimed by anyone as a dependent. He is a full-time law student at a local university. His tuition bill was $8,000. He paid the bill by withdrawing $2,000 from his savings account and borrowing the remainder from a local bank. For purposes of the education tax credits, what is the amount of Tyson's qualifying expenses?

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Question 10

In the case of the adoption credit, what special rules apply when adopting a child who is a citizen of another country?

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Question 11

Enrique and Anna filed a joint tax return and reported modified AGI of $112,000. They have one qualifying child. What is the amount of their child tax credit?

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Question 12

Clarisse's filing status is head of household. She has modified adjusted gross income of $29,000 and she made a $2,000 contribution to her IRA. What is the amount of her retirement savings contributions credit?

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Question 13

Donna and Walt paid $3,000 in qualified expenses for their son, Jimmy, to attend the South Coast Business College. Jimmy is a business major in his first year. A year ago, Jimmy was arrested and convicted of felony drug possession. He has not been in any trouble since then. What education credits are available for Donna and Walt and how much can they claim?

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Question 14

Andy and Delilah both work and have one qualifying child. They had AGI of $21,000. What is their EIC?

Accepted Answer

Based on the 2021 EIC table, a couple with one qualifying child and an AGI of $21,000 would qualify for a maximum EIC of $3,359. Therefore, option C is the correct answer. Options A, B, and D are incorrect because they either underestimate or overestimate the EIC amount.

Question 15

Thomas and Emma are married, file a joint return, and have three qualifying children. Their AGI was $21,000. What is their EIC?

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Question 16

Mindy and Xavier have a tax liability of $475 before EIC. Their EIC for the current year is $2,578. What is their total tax refund or tax liability for the current year (assume they have no other credits or additional tax liability)?

Accepted Answer

The Earned Income Credit (EIC) of $2,578 exceeds their tax liability of $475, resulting in a refund of $2,103 ($2,578 - $475).

Question 17

Juliann reported foreign income tax of $1,000 on foreign income of $8,000. Her worldwide taxable income was $89,000 and her U.S. tax liability was $23,000. What is the amount of foreign tax credit she is allowed? Briefly explain your answer.

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Question 18

The calculation for the credit for the elderly or disabled requires that the appropriate base amount be adjusted by two items. What are those two items and how is the base amount adjusted?

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Question 19

Assume a taxpayer is qualified to receive a premium tax credit. Explain how to calculate the amount of the credit.

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Question 20

Victoria is single with two qualifying children and AGI of $24,000. What is her EIC?

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Quiz 9: Tax Credits