1. What are the two main requirements for getting the child and dependent care credit.
    1. Must be for those who work or are actively seeking work. 2. Taxpayer provides more than half the cost of maintaining a household for a dependent under age 13 or a physically/mentally incapacitated spouse/dependent.
  2. What are the qualifying expenses for the child and dependent care credit?
    Household services (baby-sitting, housekeeping, nursery); daycare (if person spends more than 8 hours in home); school costs (if grade below kindergarten); payments to relative for care of qualifying person (but not if relative is claimed as dependent or is taxpayer's child/under 19). Not qualifying: transporation from/to daycare.
  3. How much can you get from a child and dependent care credit?
    Expenses cannot exceed taxpayer's earned income (if married, it's the spouse with the smallest). If full-time student/or incapable of taking care of oneself, assumed to earn $250 per month (one qualifying individual) or $500 per month (two or more qualifying individuals). The credit is limited to $3,000 for one qualifying individual and $6,000 if more than one. The credit is equal to 35% of the expenses. The rate is reduced by 1% for each $2,000 AGI exceeds $15,000. This stops at 20%.
  4. What is the credit for the elderly and disabled?
    Must be 65 before close of the tax year or retired before the close of the tax year because of total/permanent disability. Credit = 15% of base amount of $5,000 ($7,500 for MFJ with both spouses 65 or older). Reduce base amount by: tax-exempt social security, pension/annuity benefits, 1/2 the excess of AGI over $7,500 ($10,000 for MFJ). Cannot be married filing separate.
  5. What is the Hope credit?
    A maximum partially refundable (up to 40% refundable) credit of $2,500 per student for each of the first four years of post-secondary education (for taxpayer, taxpayer's spouse, or taxpayer's dependents). This amount is the sum of 100% of the first $2,000 in qualified expenses and 25% of the next $2,000. Qualified expenses: tuition/fees, books, required course materials. Cannot be claimed if: claim of education IRA/state tuition program; convicted of fed/state felony for possession/distribution; not taking at least half normal full-time load for one academic period that begins in the calendar year. Phaseout: $80,000-$90,000 (single), $160,000-$180,000 (MFJ). Must file joint.
  6. What is the Lifetime Learning Credit?
    Credit of 20% of qualified tuition by taxpayer for any year Hope is not claimed. Max per year is $2,000 per taxpayer. 20% of up to $10,000 of qualified tuition/fees (for taxpayer, taxpayer's spouse or taxpayer's dependents). Can be for any year of education. Phaseout: $50,000-$60,000 (single), $100,000-$120,000 (MFJ). Non qualified: room/board, activity fees, athletic fees, insurance, transportation. Cannot be used if similar above-line deductions taken.
  7. What is the child tax credit?
    Up to $1,000 per qualifying child (child, descendant, stepchild, eligible foster child, sibling, or descendant of siblings). US citizen, taxpayer claims as dependent, less than 17 years at end of tax year. Phaseout: $75,000 (single), $110,000 (MFJ), $55,000 (separate). Reduce by $50 for each $1,000 over threshold. Refundable up to 15% of earned income in excess of $3,000 (additional child tax credit; form 8812).
  8. What is the adoption credit?
    Nonrefundable. Child must be under 18 or physically or mentally incapable of self-care. Qualified expenses: reasonable/necessary adoption expenses (fees, court costs, attorneys). Not qualified: surrogate parenting, adoption of spouse's child, infant care supplies. Max credit: $12,150/child. Phaseout $182,180-$222,180. Credit reduced if get employee assistance. Unused credit can be carryforward five years.
  9. What is the retirement savings contribution credit?
    For a qualified retirement plan (like an IRA). AGI limit: $27,750 (single), $41,625 (MFJ), $41,625 (HH). Max credit is 50% of up to $2,000 contribution or $1,000.
  10. What is the residential energy credit?
    Up to $1,500 (exterior doors, windows, insulation, heat pumps, furnaces, air, heaters). 30% of qualified costs (for principal residence).
  11. What is the residential mortgage interest credit?
    This is a credit from the state (based on bonds).
  12. What is the foreign tax credit?
    For gross taxable liability, after nonrefundable personal credits and other credits.
  13. What is the earned income tax credit?
    Must provide TIN/refundable. If no qualifying child, must have principal residence in US for more than half tax year, at least 25 but not over 64, not dependent. A qualifying child of someone else cannot take the EIC.
  14. What is a qualifying child for the earned income tax credit?
    • Relationship: child must be related by birth/adoption/stepchild/eligible foster child.
    • Residency: Taxpayer provides child's principal place of above for more than half year.
    • Age: child under 19 at close of tax year, permanently disabled, student under 24.
  15. What is earned income for the earned income tax credit?
    Wages, salaries, tips, net self-employment income. Not: nontaxable compensation, welfare, veteran's benefits, pensions, annuities, unemployment comp, scholarships. Disqualified income: interest, dividends, capital gains, passive income, nonbusiness rents/royalties. Cannot exceed $3,100.
  16. What is an advance payment on the earned income tax credit?
    Can get it through paycheck but can be no more than 60% of the benefit with qualifying child.
  17. If two people claim a qualifying child for the earned income tax credit?
    • Tax-breaker rules:
    • 1. The parent spent with the longer time during the year.
    • 2. If equal length, go to AGI.
    • 3. No parents, the taxpayer with highest AGI.
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