Determine the amount of the Earned Income Credit in each of the following cases. Assume that...

Determine the amount of the Earned Income Credit in each of the following cases. Assume that the person or persons are eligible to take the credit. Calculate the credit using the formulas.

A single person with earned income of $7,554 and no qualifying children.

A single person with earned income of $22,500 and two qualifying children.

A married couple filing jointly with earned income of $34,190 and one qualifying child.

Solutions

Expert Solution

Solution

a. for earned income up to 8270 earned income credit of 7.65% or earned income or 506 whichever is lower will be given.

Earned income credit= 7554*7.65%= 578, since maximum of 506 is only available. Earned income credit= 506

b. For eligible person with two qualifying children eligible for 40% credit of earned income up to 13930 is available for single individual. And phase out starts for amount exceeding 18190 at 21.06%

Maximum income eligible for credit	13930
X 40%- Maximum credit	5572

22500-18190 phase out threshold	4310
X 21.06%- Phase out amount	907.686

Net earned income credit	4,875

c. For married filing jointly status, with one qualifying child will be eligible for a credit of 34% of earned income up to 9920, phase out starts at 15.98% for income in excess of 23740

Maximum income eligible for credit	9920
X 40%- Maximum credit	3968

34190-23740 phase out threshold	10450
X 15.98%- Phase out amount	1669.91

Net earned income credit	3097

ekkarill92 answered 1 year ago

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