Ch 2 - Tax Calculation and Credits

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Ricksta760
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229744
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Ch 2 - Tax Calculation and Credits
Updated:
2013-08-12 22:45:44
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Tax Calculation Credits
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Ch 2 - Tax Calculation and Credits
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  1. Personal Credits
    (may reduce personal tax liability to 0, but they may not result in a cash refund)
    • 1. Child and Dependent Care Credit
    • 2. Elderly and permenently disabled credit
    • 3. Education credits, 1. Lifetime Learning Credits
    • 4. Retirement Savings Contribution Credit
    • 5. Foreign Tax Credit
    • 6. General Business Credit.
  2. Refundable Credits 
    are subtracted from income tax liability and may result in a cash refund.
    • 1. Child Tax Credit (refund is limited)
    • 2. Earned Income Credit
    • 3. Witholding taxes (w-2)
    • 4. Excess Social Security
    • 5. Long-Term unused Min Tax Credit
    • 6. American Opp credit (40% refundable)
    • 7. Adoption Credit (
  3. Child and Dependent Care Credit
    • 1. 20-35% of eligible expenditures
    • 2. Max Exp: $3000 one child/$6000 2 or more
    • 3. General Rule: both parents working and pay to bbysit
    • 4. child under 13 whom exemption can be claimed.
    • 5. no grammar school expenses
  4. Credit for the elderly and/or permanently disabled
    • 1. credit of 15% of eligible income, 65 years of age or older, under 65 retired due to permanant disability.
    • 2. Base amts: 5k single and married if 1 qualifies, 7500 married joint both qualify.A
    • 3. AGI Limits: 7.5k single, 10k married joint, 5k married seperate.
  5. Calculation of Credit for the Elderly and/or Permanently Disabled.
    • 5000
    • <ALL Social Sec>
    • <1/2 over 7.5k>
    • ------------------
    • Balance 
    • x 15%
    • --------------------
    • Credit
  6. American Opportunity Credit
    (not refundable, 40% refundable)
    • 1. 2500 limit
    • 2. 100% of first 2000 exp, and 25% of second 2000 exp.
    • 3. First four years of college
    • 4. Multiple kids ok for credit
    • 5. Not for convicted felons
    • 6. Phase OUT***
  7. The Lifetime Learning Credit
    • 1. $2000 max
    • 2. Only One Credit per yr is allowed
    • 3. 20% of of qualified exp up to $10,000.
    • 4. Phase OUT ***
  8. Adoption Credit
    • 1. $12650 per child
    • 2. of qualifying expenses not including medical expenses.
    • 3. PHASE OUT ***
    • 4.
  9. Retirement Savings Contributinos Credit
    • 1. at least 18 yrs old
    • 2. not a full-time student
    • 3. Not a dependent.
  10. Foreign Tax Credit
    • 1. Lesser of Foreign Taxes paid or (tax income from all foreign ops/taxable income) x US TAX
    • 2. Any disallowed foreign tax credit may be carried over as follows: 1 year back, 10 going forward.
  11. General Business Credit
    • 1. Credits may not exceed net income tax
    • 2.
    • 0-25k 100% allowable
    • Excess 75% allowable
    • 3. Unused credits may be carried back 1 and 20 going forward.
  12. Working Opportunity Credit
    (refundable)
    • 1. credit to employers who hire employees from a targeted group.
    • 2. 40% of first $6000 of first year's wges
    • 3. handicapped, 18-24 from poor families, vitnam vets, food stamp recepients.
  13. "Child" tax credit
    (refundable)
    Phase Out
    • 1. $1000 credit for qualifying child
    • 2. CARES rules except child has to be under 17 years old.
    • 3. Child must be a citizen, a national, or a resident of the US.
    • 4. PHASE OUT***
  14. Earned Income Credit
    Refundable
    • 1. Most common questions is it refundable
    • 2. Live in US more than half the tax year
    • 3. over 25 years old
    • 4. earned low income
  15. Witholding Tax
    (refundable)
    All income taxes witheld from a taxpayer's paycheck are treated as a "credit" against the taxpayer's tax liability.
  16. Excess FICA witholdings
    • 1. if excess witheld from two employers you may use a credit (excess)
    • 2. If excess withheld from one employer ask for refund from employer.

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