Question

In 2018, Amanda and Jaxon Stuart have a daughter who is 1 year old. The Stuarts are full-time students and they are both 23 years old. Their only sources of income are gains from stock they held for three years before selling and wages from part-time jobs. What is their earned income credit in the following alternative scenarios if they file jointly? Use Exhibit 8-10. a. Their AGI is $18,600, consisting of $6,800 of capital gains and $11,800 of wages b. Their AGI is $18,600, consisting of $11,800 of lottery winnings (unearned income) and $6,800 of wages. . Their AGI is $27,700, consisting of $21,800 of wages and $5,900 of lottery winnings (unearned income). (Round your intermediate calculations to the nearest whole dollar amount.) Their AGI is $27,700, consisting of $5,900 of wages and $21,800 of lottery winnings (unearned income). (Round your intermediate calculations to the nearest whole dollar amount.)

Answer 1

(a). Their AGI is $18600 consisting of $6800 of capital gain and $11800 as wages. Their earned income credit will be $0 because their investment income is excess of $3500 and are thus not eligible for earned income credit. Note that capital gain is considered as investment income.

(b) . Their AGI is $18600 consisting of $11800 of lottery winnings (unearned income) and $6800 of wages. Following table shows earned income credit :-

Description	amount	Explanation
1 Earned income	$6800
2 Maximum earned income eligible for earned income credit	$46010
3. Earned income eligible for credit	$6800	Lower of (1) & (2)
4 Earned income credit percentage	34%
5 Earned income credit before phase out	$2312
6 Phase out threshold for AGI	$24350
7 AGI in excess if threshold	0	(1)-(6)
8 Phase out percentage	15.98%
9 Credit phase-out amount	0
10. Earned income credit	$2312	(5)-(9)

(c) . AGI is $27700 consisting of $21800 of wages and $5900 of lottery

Description	amount	explanation
1 Earned income	21800
2. Maximum earned income eligible for credit	$46010
3. Earned income eligible for credit	$21800	lower of (1) & (2)
4. Earned income credit percentage	34%
5. Earned income credit	$7412
6. Maximum earned income credit available	$3461
7 . Phase out threshold	$24350
8. AGI in excess of threshold	$3350	27700-24350
Phase out percentage Phase out credit	34% $1139
Earned income credit	$2322	3461-1139

Note :- due to lack of time on board , I am able to do this much. Please upload remaining portion next time , I will definitely do it then. I hope you will understand as it took a bit of time to get all the updated information as applicable for 2018 and then to implement it. Inconvenience caused to you is highly regret.