Question

Mr. and Mrs. Alalami Golden are married and have one pre-school-aged child. During the

year, Mrs. Alalami is employed and earns $64,000 while Mr. Alalami is a full-time student for

the entire year. The amount paid for tuition and fees is $8,700.

          Required: On a joint income tax return, calculate their child tax credit and the allowed education

          expenses deduction.

Answer 1

Answer:

Let's understand the meaning of Child Tax Credit.

The child tax credit provides a credit of up to $2,000 per child under age 17. If the credit exceeds taxes owed, families may receive up to $1,400 per child as a refund. Other dependents—including children ages 17–18 and full-time college students ages 19–24 — can receive a nonrefundable credit of up to $500 each.

Therefore in the given case Mr. and Mrs. Alalami Golden are married and have one pre-school-aged child which means the Total Child Tax Credit will be $2,000. Even During the year, Mr. Alalami is a full-time student for the entire year he is not eligible to Tax credit because of age criteria.

Hence The total Child Tax Credit will be $2,000 only.

Whereas, the conditions for the amount paid towards tuition and fees paid are as follows:

1. The Deduction is worth either $4000 or $2000, depending upon on your modified adjusted gross income (MAGI) and filing status.
2. Married Couple filing seprately are not eligible.
3. The Deduction cannot be claimed in conjunction with other education related tax credit.
4. $4000 if MAGI is $65,000 for single filer and $130,000 for a couple.
5. $2000 if MAGI is more then $65,000 and less then $80,000 as a single filer and $130,000 and $160,000 for a couple.
6. NIL if MAGI is more then $80,000.

Therefore in the given case Mr. & Mrs. Alalami earns $64,000, which make them eligible for the deduction of $4,000 as total education expenses deductible but $2,000 is already taken as Child Credit Tax. Hence the total amount deductible under this category of Tutions & Fees will be $ 2,000 only.