In: Accounting
The benefits of many deductions, credits, or other benefits are limited to taxpayers with Adjusted Gross Income below certain limits.
Required:
a. Select statements from the below that explains how the limitation (phaseout) process works.
Taxpayers with AGI in excess of certain specified amounts can utilize the full amount of many deductions, credits, or other tax benefits.
Taxpayers with AGI less than certain specified amounts can utilize the full amount of many deductions, credits, or other tax benefits.
Taxpayers with AGI less than certain specified amounts are prohibited from utilizing the full amount of many deductions, credits, or other tax benefits.
Taxpayers with AGI in excess of certain specified amounts can fully utilize deductions, but not credits, or other tax benefits.
b. Select examples of deductions, credits, or other benefits that are limited from the given list. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answers and double click the box with the question mark to empty the box for a wrong answers. Any boxes left with a question mark will be automatically graded as incorrect.)
a)Tax Payers with AGI less than certain specified amounts can utilize the full amount of many deductions,credits or other tax benefits.
Explanation:There is specific income range that the U.S. Internal Revenue Service (IRS) uses to determine what tax payers may be eligible for a specific tax credit.Under the phase out process there is a gradual reduction of the tax benefits that a tax payer is eligible for as their income approaches the upper limit to qualify for that credit.A tax payer with an income at the lowest end of the range may be eligible for the maximum amount of the tax credit whereas a tax payer whose income falls on the highest end is eligible for the minimum amount.When a tax payer income exceeds the upper limit they may become ineligible for the tax benefits.
b)Examples of deductions,credits or other benefits that are limited from the given list are given below:
Earned Income Tax Credit
Child Care Credit
Child Tax credit
IRA deductions