Julie may claim 700 of the child and dependent care credit Description Amount

# Julie may claim 700 of the child and dependent care

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Julie may claim \$700 of the child and dependent care credit. Description Amount Explanation (1) Dependent care expenditures \$4,000 (2) Limit on qualifying expenditures for one dependent \$3,000 (3) Julie’s earned income \$2,000 (4) Expenditures eligible for credit \$2,000 Least of (1), (2), and (3) (5) Credit percentage rate 35% AGI not over \$15,000 Child and dependent care credit \$700 (4) × (5) 7- 47
Chapter 7 - Individual Income Tax Computation and Tax Credits 74. [LO 4] In 2012, Elaine paid \$2,800 of tuition and \$600 for books for her dependent son to attend State University this past fall as a freshman. Elaine files a joint return with her husband. What is the maximum American opportunity credit Elaine can claim for the tuition payment in each of the following alternative situations? 7- 48
Chapter 7 - Individual Income Tax Computation and Tax Credits a. Elaine’s AGI is \$80,000. Elaine may claim an American opportunity credit (AOC) of \$2,350. Description Amount Explanation (1) AOC before phase-out \$2,350 2,000 × 100% + (3,400 2,000) × 25% (2) AGI \$80,000 (3) Phase-out threshold 160,000 (4) Excess AGI \$0 (2) – (3) {but not <0 and limited to a maximum of \$20,000} (5) Phase-out range for taxpayer filing as married filing jointly \$20,000 \$180,000 – \$160,000 (6) Phase-out percentage 0% (4) / (5) or 100% max (7) Phase-out amount \$0 (1) × (6) AOC after-phase-out \$2,350 (1) – (7) b. Elaine’s AGI is \$168,000. Elaine may claim an AOC of \$1,410. Description Amount Explanation (1) AOC before phase-out \$2,350 2,000 × 100% + (3,400 – 2,000) × 25% (2) AGI \$168,000 (3) Phase-out threshold 160,000 (4) Excess AGI \$8,000 (2) – (3) (5) Phase-out range for taxpayer filing as married filing jointly \$20,000 \$180,000 – \$160,000 (6) Phase-out percentage 40% (4) / (5) or 100% max (7) Phase-out amount \$940 (1) × (6) AOC after-phase-out \$1,410 (1) – (7) c. Elaine’s AGI is \$184,000. Because Elaine’s AGI exceeds the threshold amount, she may not claim an AOC. Description Amount Explanation (1) AOC before phase-out \$2,350 2,000 × 100% + (3,400 – 2,000) × 25% (2) AGI \$184,000 7- 49
Chapter 7 - Individual Income Tax Computation and Tax Credits (3) Phase-out threshold 160,000 (4) Excess AGI \$24,000 (2) – (3) (limited to \$20,000) (5) Phase-out range for taxpayer filing as married filing jointly \$20,000 \$180,000 – \$160,000 (6) Phase-out percentage 100% (4) / (5) (7) Phase-out amount \$2,350 (1) × (6) AOC after-phase-out \$0 (1) – (7) 75. [LO 4] {Planning} In 2012, Laureen is currently single. She paid \$2,800 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen (\$2,800 each for a total of \$5,600). Sheri and Meri qualify as Laureen’s dependents. Laureen also paid \$1,900 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University. Finally, Laureen paid \$1,200 for herself to attend seminars at a community college to help her improve her job skills. What is the maximum amount of education credits Laureen can claim for these expenditures in each of the following alternative scenarios? a. Laureen’s AGI is \$45,000. If Laureen claims education credits is she allowed to deduct as for AGI expenses tuition costs for her daughters that do not generate credits? (Assume the 2011 rules apply for purposes of the qualified education expense deduction.) Explain.

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• Fall '12
• MichaeleL.Morrow
• Taxation in the United States