H and W are married with three children.At the close of 20x6, the children, X, Y, and Z, were ages 2, 6, and 8, respectively.H and W claim a dependency exemption for each of the children.This year H and W reported adjusted gross income of $115,500.The allowable child tax credit for H and W is
A)$2,700
B)$0
C)$1,200
D)$1,000
E)$900

Question

Quizplus · Accepted Answer

The child tax credit for each child under age 17 is $2,000. Therefore, the total credit for three children is $6,000. However, the credit is subject to a phase-out for higher income taxpayers. The phase-out begins at $400,000 for married filing jointly taxpayers. Since H and W's income is below this threshold, they can claim the full credit. Therefore, the allowable child tax credit for H and W is $6,000, which is a direct reduction of their tax liability. However, the maximum amount of credit that can be refunded is $1,400 per qualifying child, so the total credit allowed on the return cannot exceed the tax liability or $2,700, whichever is less.

H and W Are Married with Three Children