Question

Pat and diedra Dobson file a joint tax return for 2016 the dobsons agi is 30,900 of which 27,3000 is taxable wages. The dobsons take the other standard deduction and clam as dependents their two teenage children, age 13 ad 15. Other than the child tax credit, the dobsons do not claim any nonrefundable personal tax credits. Compute the dobson’s nonrefundable and refundable child tax credit.

Answer 1

Number of qualifying children: 2 * $1,000 = $2,000

AGI = $30,900………………….(i)

Married couples filing jointly (eligible amount) = $110,000…………………….(ii)

Since, eligible amount is more than AGI, subtract (ii) from (i)

i.e. $110,000 - $30,900 = $79,100 and round off to next multiple of 1000 i.e. $80,000……………..(iii)

Multiply (iii) with 5% = $80,000 *5% = $4,000

Since, Eligible child credit of $2,000 is less than calculated child credit of $4,000, full child tax credit of $2,000 can be taken.

Tax Liability of Dobsons:-

Taxable Wages = $27,300 (assuming there is an extra 0 by mistake added in the question)

Tax Rate:-

$0-$9,275 = 10% i.e. $9,275 *10/100 = $927.5………………..(a)

$9,276- $37,650 = 15% of the amount over $9,275.

i.e. $27,300- $9,275 = $17,575 *15/100 = $2,636.25………….(b)

Thus, total tax payable – (a) + (b) = $3,563.75

Since, The couple files a joint return and reports income of $30,900. Their AGI is well below the $110,000 phase-out threshold for married couples filing jointly. They can claim the full $2,000 child credit since the credit does not exceed their tax liability.