In: Accounting
[The following information applies to the questions displayed below.]
Trey has two dependents, his daughters, ages 14 and 17, at
year-end. Trey files a joint return with his wife.
What amount of child credit will Trey be able to claim for his
daughters under each of the following alternative situations? Use
Exhibit 8-8.
a. His AGI is $100,000.
B. his AGI is $420,000
c. His AGI is $420,100, and his daughters are ages 10 and 12.
Answer :
Child Tax Credit = $2,000 per qualifying child.
The phaseout of credit begins at $400,000 for married filing jointly. For being a qualified child, dependant must be below 17 years old.
a. AGI = $100,000
Child Tax Credit = $2,000
Here, Trey will not be able to claim child credit for his daughter aged 17
Since, AGI is below threshold, Trey can claim full tax credit of $2,000 for his one daughter.
b. AGI = $420,000
Amount exceeding threshold = $420,000 - $400,000 = $20,000
Phase out = ($20,000/$1,000) * $50 = $1,000
Child Tax Credit = $2,000 - $1,000 = $1,000
Trey will be able to claim child tax credit of $1,000
c. AGI = $420,100
Amount exceeding threshold = $420,100 - $400,000 = $20,100
Phase out = ($20,100/$1,000) = 20.1 rounded to 21
Phase out = 21 * $50 = $1,050
In this case, Trey will be able to claim child tax credit for both the daughters as both are aged below 17.
Child tax credit = (2 * $2,000) - $1,050 = $2,950
Trey will be able to claim child tax credit of $2,950