Question

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 1

Answer -

a.

His AGI is $100000

Trey’s AGI is less than the phase out threshold ($400000) for a joint return

Trey has a $2000 child tax credit for his qualifying child age 14 (under 17) at year end

And a $500 child tax credit for his qualifying dependent (not under 17 at year end)

So,

His child tax credit is $2500

b.

His AGI is $420000

Before phase out, tery has a $2000 child tax credit for his qualifying child age 14 (under 17) at year end

And a $500 child tax credit for his qualifying dependent (not under 17 at year end)

Calculation :

$420000 AGI - $400000 (threshold) = $20000

$20000 excess AGI divided by 1000 = 20

20 * 50 = $1000 (amount of the phase out)

So,

Child tax credit = Allowable credit - Amount of the phase out

Child tax credit = $2500 - $1000

Child tax credit = $1500

c.

His AGI is $420100 and his daughters are ages 10 and 12

Before phase out, Trey has a $2000 child tax credit for each of his qualifying children ages 10 and 12 (under 17) at year end ($4000 total)

Calculation :

$420100 AGI - $400000 (threshold) = $20100

$20100 excess AGI divided by 1000 = 20.1

21 * 50 = $1050 (amount of the phase out)

[Note : 21 taken round up from 20.1]

So,

Child tax credit = Allowable credit - Amount of the phase out

Child tax credit = $4000 - $1050

Child tax credit = $2950