Question 1

Tina has $93,000 total taxable income, which includes $18,000 of taxable income from Japan. She paid $2,200 in foreign income taxes and her U.S. tax liability is $19,610. Tina's foreign tax credit is: (Do not round interim calculations)

Accepted Answer

Tina's foreign tax credit is limited to the U.S. tax liability on her foreign income. To calculate this, divide the foreign income ($18,000) by the total taxable income ($93,000), and then multiply by the total U.S. tax liability ($19,610). This gives ($18,000 / $93,000) * $19,610 = $3,795 as the limit. Since she paid $2,200 in foreign taxes, which is less than the limit, her foreign tax credit is $2,200.

Question 2

In which of the following situations would a taxpayer be better off to take the foreign taxes paid as an itemized deduction rather than as a foreign tax credit?

Accepted Answer

The taxpayer would be better off taking the foreign taxes paid as an itemized deduction rather than as a foreign tax credit when the foreign tax paid was a property tax. This is because the foreign tax credit is generally available for income taxes paid to a foreign country, not for property taxes. Property taxes can be itemized deductions if they are related to personal property, which could provide a greater benefit depending on the taxpayer's overall tax situation.

Question 3

Debbie files as head of household and has AGI of $35,500. During the year, she contributed $1,000 to a 401(k). What amount of retirement savings contributions credit can Debbie take?

Accepted Answer

The answer of Debbie files as head of household and...

Question 4

Sandra is single and her son Julius is 12 years old. If her AGI is $79,000, what amount of child tax credit can Sandra claim?

Accepted Answer

The answer of Sandra is single and her son Julius...

Question 5

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 maximum credit of $2,500 per student for qualified education expenses incurred during the first four years of post-secondary education. Since Cash is in his first year of college and attended full-time, he qualifies for the maximum credit. Therefore, Warren and Erika's American opportunity tax credit is $2,500.

Question 6

Julia and Omar are married and file a joint tax return. They have two dependent daughters, ages 14 and 18. If their AGI is $98,000, what amount of child tax credit can they claim?

Accepted Answer

The answer of Julia and Omar are married and file...

Question 7

Jesus and Mindy have modified AGI of $210,000, adopted a girl from Miami, Florida, and incurred a total of $18,000 in qualified adoption expenses. What is the amount of adoption credit they can claim in the current year? (Do not round interim calculations)

Accepted Answer

The maximum adoption credit for the year 2021 is $14,440 per child, and it is phased out for taxpayers with a modified AGI above $216,660. Since Jesus and Mindy's modified AGI is $210,000, they are eligible for the full credit. Thus, they can claim a credit for the full amount of their qualified adoption expenses, which is $18,000. Therefore, the amount of adoption credit they can claim in the current year is $18,000.

Question 8

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 Gina's foreign tax credit, we need to determine the portion of her U.S. tax liability that is attributable to her foreign income.

First, we need to calculate the portion of her total income that is taxable in the U.S.:

$39,000 total income - $6,000 foreign income = $33,000 U.S. income

Next, we need to calculate the ratio of foreign income to total income:

$6,000 foreign income / $39,000 total income = 0.1538

This means that 15.38% of Gina's income is foreign income.

Now we can calculate the portion of her U.S. tax liability that is attributable to her foreign income:

0.1538 x $3,610 U.S. tax liability = $555

Finally, we can compare this amount to the foreign taxes that Gina actually paid:

$555 U.S. tax liability on foreign income - $1,200 foreign taxes paid = -$645

Since the foreign taxes paid ($1,200) are greater than the U.S. tax liability on foreign income ($555), Gina is eligible for a foreign tax credit of $555.

Question 9

After years of working with the orphanage and the government, Walt and Kim adopted a little girl from China. The adoption process, which became final in January 2015, incurred the following qualified adoption expenses. What amount of adoption credit can Walt and Kim claim and in what year? Assume there is no credit limitation due to their AGI amount.

Accepted Answer

The answer of After years of working with the orphanage...

Question 10

Waseem has $103,000 total taxable income, which includes $11,000 of taxable income from India. He paid $4,000 in foreign income taxes and his U.S. tax liability is $21,610. Waseem's foreign tax credit is: (Do not round interim calculations)

Accepted Answer

Waseem's foreign tax credit is calculated as the lesser of the foreign income taxes paid ($4,000) or the proportion of his total tax liability that is attributable to his foreign income ($11,000/$103,000 x $21,610 = $2,308). Since $2,308 is less than $4,000, the foreign tax credit is $2,308.

Question 11

Which of the following conditions must be met for a taxpayer to be able to claim the foreign tax credit without filing Form 1116?

Accepted Answer

The answer of Which of the following conditions must be...

Question 12

Dean and Sue are married filing jointly with AGI of $28,000. They made a $1,500 contribution to a qualified retirement plan. How much is their retirement savings contributions credit?

Accepted Answer

The answer of Dean and Sue are married filing jointly...

Question 13

Shawn and Dahlia are married; both work and have one qualifying child. They had AGI of $19,000. What is their Earned Income Credit?

Accepted Answer

Based on the IRS EIC table for 2021, the maximum earned income credit for a married couple with one qualifying child and an AGI of $19,000 is $3,359. The EIC gradually phases out for married couples with an AGI above $19,000, so option D is not the correct choice. Option A is not correct as even though their AGI is low, they still qualify for the EIC with one qualifying child. Option B is not correct as the maximum EIC for their income and family size is higher than $503.

Question 14

Which of the account contributions qualify for the retirement savings contributions credit?

Accepted Answer

All of these contributions qualify for the retirement savings contributions credit. This credit provides a percentage reduction in taxes owed based on contributions made to eligible retirement accounts. Therefore, it is beneficial to contribute to all of these types of accounts if possible.

Question 15

Max paid $2,500 in foreign income taxes to Peru. His total income was $65,000, which included $9,000 of foreign income. His U.S. tax liability is $17,750. How much can Max claim as foreign tax credit? (Do not round interim calculations.)

Accepted Answer

To calculate the foreign tax credit, first we need to determine the ratio of foreign income to total income: 
Foreign income/Total income = $9,000/$65,000 = 0.1385
This means that 13.85% of Max's income came from Peru. 
Next, we can determine how much of Max's U.S. tax liability is attributed to his foreign income:
Foreign income ratio x U.S. tax liability = 0.1385 x $17,750 = $2,458.38 
Since Max paid $2,500 in foreign income taxes to Peru, he can claim the full amount of $2,500 as a foreign tax credit on his U.S. tax return. However, since he can only claim up to $2,458.38 of the credit towards his U.S. tax liability, he will not receive the full benefit of the $2,500 credit.

Question 16

Angelina is single and has modified AGI of $275,000. She adopted a boy from San Antonio, Texas, and incurred a total of $16,000 in qualified adoption expenses. What is the amount of adoption credit she can take?

Accepted Answer

Angelina's modified AGI exceeds the phase-out threshold for the adoption credit, which begins at $223,410 and is completely phased out at $263,410. Since her AGI is $275,000, she is not eligible for the adoption credit.

Question 17

Presley and Jake are married filing joint taxpayers. They have twin sons, ages 7. If their AGI is $116,950, what amount of child tax credit can they claim?

Accepted Answer

For the tax year 2023, the Child Tax Credit is $2,000 per qualifying child, but it begins to phase out for married couples filing jointly at an AGI of $400,000. Since Presley and Jake's AGI is $116,950, well below the phase-out threshold, they can claim the full credit amount. However, due to a misunderstanding in the question's phrasing or a mistake in the provided options, the correct calculation based on the given options and AGI is not directly applicable to the standard IRS guidelines for the Child Tax Credit. The most accurate answer based on standard tax rules and the provided options would be $2,000 per child, but given the options and the question's structure, the intended correct answer seems to be a mistake. Therefore, based on standard tax rules, they should be able to claim $2,000 per child, but the correct answer according to the options provided is not clear due to a possible error in the question setup.

Question 18

Rudy and Rebecca have AGI of $156,000. They have twin daughters, Ashley and Amy, ages 5. What amount of child tax credit can they claim?

Accepted Answer

For the tax year 2022, the Child Tax Credit reverts to $2,000 per qualifying child, but the credit begins to phase out for taxpayers with adjusted gross income (AGI) over $400,000 for married filing jointly and $200,000 for all other filers. Since Rudy and Rebecca's AGI is $156,000, they are below the phase-out threshold and would normally be eligible for the full credit. However, the question does not provide the correct amount based on the information given, leading to confusion. Given the options provided, none accurately reflect the expected amount based on the standard tax guidelines for the Child Tax Credit for two children at $2,000 each, which would be $4,000 total, not listed among the options. Therefore, the confusion in the question's structure and the provided options leads to the conclusion that none of the given choices accurately represent the correct Child Tax Credit amount based on the standard guidelines and the information provided about Rudy and Rebecca's situation.

Question 19

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

Accepted Answer

The statement "The credit may be claimed regardless of the taxpayer's modified AGI amounts" is not true. The adoption credit has income phase-outs, meaning that if a taxpayer's modified adjusted gross income (MAGI) exceeds a certain amount, the credit will be reduced or even eliminated. For tax year 2021, the phase-out range begins at $216,660 and ends at $256,660 for taxpayers filing joint returns, and begins at $144,360 and ends at $184,360 for other taxpayers.

Question 20

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

Accepted Answer

Adoption of foreign country children does qualify for the credit.

Quiz 9: Tax Credits

Tina has $93,000 total taxable income, which includes $18,000 of taxable income from Japan. She paid $2,200 in foreign income taxes and her U.S. tax liability is $19,610. Tina's foreign tax credit is: (Do not round interim calculations)

In which of the following situations would a taxpayer be better off to take the foreign taxes paid as an itemized deduction rather than as a foreign tax credit?

Debbie files as head of household and has AGI of $35,500. During the year, she contributed $1,000 to a 401(k) . What amount of retirement savings contributions credit can Debbie take?

Sandra is single and her son Julius is 12 years old. If her AGI is $79,000, what amount of child tax credit can Sandra claim?

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?

Julia and Omar are married and file a joint tax return. They have two dependent daughters, ages 14 and 18. If their AGI is $98,000, what amount of child tax credit can they claim?

Jesus and Mindy have modified AGI of $210,000, adopted a girl from Miami, Florida, and incurred a total of $18,000 in qualified adoption expenses. What is the amount of adoption credit they can claim in the current year? (Do not round interim calculations)

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)

Waseem has $103,000 total taxable income, which includes $11,000 of taxable income from India. He paid $4,000 in foreign income taxes and his U.S. tax liability is $21,610. Waseem's foreign tax credit is: (Do not round interim calculations)

Which of the following conditions must be met for a taxpayer to be able to claim the foreign tax credit without filing Form 1116?

Dean and Sue are married filing jointly with AGI of $28,000. They made a $1,500 contribution to a qualified retirement plan. How much is their retirement savings contributions credit?

Shawn and Dahlia are married; both work and have one qualifying child. They had AGI of $19,000. What is their Earned Income Credit?

Which of the account contributions qualify for the retirement savings contributions credit?

Max paid $2,500 in foreign income taxes to Peru. His total income was $65,000, which included $9,000 of foreign income. His U.S. tax liability is $17,750. How much can Max claim as foreign tax credit? (Do not round interim calculations.)

Angelina is single and has modified AGI of $275,000. She adopted a boy from San Antonio, Texas, and incurred a total of $16,000 in qualified adoption expenses. What is the amount of adoption credit she can take?

Presley and Jake are married filing joint taxpayers. They have twin sons, ages 7. If their AGI is $116,950, what amount of child tax credit can they claim?

Rudy and Rebecca have AGI of $156,000. They have twin daughters, Ashley and Amy, ages 5. What amount of child tax credit can they claim?

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

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