Chapter 633 9 Tax Credits TB

Chapter 633 9 Tax Credits TB - Chapter 633 9 Tax Credits,...

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Chapter 633 9 Tax Credits, Prepayments, and Special Methods TRUE-FALSE QUESTIONS CHAPTER 9 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. A tax credit produces a tax bene t only to the extent of the effective tax rate in the taxpayer s top bracket multiplied by the amount of the credit. A payment to a nursing home for the care of a disabled, dependent parent quali es as an employment related expense for the household and dependent care credit. If a taxpayer is married on the last day of the tax year, a joint return must be led in order to claim a dependent care credit. Payments made to dependent household members may be included in the computation of dependent care expenses. Child care expenses incurred by a taxpayer who is attending a full-time course of studies at an educational institution may be included in the credit computation. Transportation costs for a child between the taxpayer s household and the child care location are allowable child care expenses. The amount paid to a baby sitter for keeping a six-year-old child on Friday evenings to enable the taxpayer and spouse to attend bridge parties with friends quali es for the dependent care credit. The credit for outside dependent care applies only to dependents under 13 years of age. Tuition paid to a private school for a third-grader quali es for the dependent care credit. The credit for the elderly applies only to individuals age 65 or older. Social security or railroad retirement bene ts can reduce or eliminate the amount of allowable credit for the elderly. Foreign income taxes paid to a foreign country may be claimed as a credit against United States income tax or deducted as an itemized deduction. The general business credit is subject to recapture only if disposition of the property results in an ordinary income. Taxpayers may elect to carry forward unused general business credit for 10 years rather than back one year and forward 20 years. Qualifying property for the general business credit includes buildings and their structural components. The work opportunity credit is allowed for up to $2,400. The employer s wage deduction is reduced by the amount of work opportunity credit claimed. An excess FICA credit may be claimed against the income tax if the taxpayer works for only one employer and more than the maximum social security tax is withheld during the year. The earned income credit is refundable. A single taxpayer is required to provide over half the cost of maintaining a household for himself or herself and a dependent child in order to qualify for the earned income credit. Certain individuals can get a refundable tax credit of 40 percent of earned income. A married taxpayer is required to le a joint return in all circumstances in order to be eligible for the earned income credit. Farmers may claim a credit against their income tax for the federal tax on gasoline used on a farm. If an
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Chapter 633 9 Tax Credits TB - Chapter 633 9 Tax Credits,...

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