In 2016, Alex has income from wages of $16,000, adjusted gross income of $18,000, and tax liability of $300 before the earned income credit. What is the amount of Alex's earned income credit for 2016, assuming he is single and his 5-year-old dependent son lives with him for the full year?

Question

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To calculate the earned income credit, we need to know Alex's earned income, which is his income from wages ($16,000). We also need to know his adjusted gross income, which is $18,000. Using these two numbers, we can calculate Alex's earned income credit as follows:

- For one qualifying child (his 5-year-old son), the maximum earned income credit for 2016 is $3,373.
- However, the actual amount of the credit depends on Alex's earned income. Since his earned income is $16,000, we can use the table in the Form 1040 instructions (p. 59) to find the credit amount corresponding to his income level and one qualifying child, which is $3,373.
- Since Alex's tax liability before the earned income credit is only $300, the credit will completely eliminate his tax liability and any remaining credit will be refunded to him. Therefore, the amount of Alex's earned income credit is $3,373.

The correct answer is D) $3,373.

In 2016, Alex Has Income from Wages of $16,000, Adjusted