Question

Danielle and her 3-year-old daughter Kyra lived with her mother all year. Danielle is 25 years old, unmarried, and her adjusted gross income (AGI) is $18,000. Danielle’s mother's AGI is $15,000. Kyra's father did not live with Danielle or her daughter. Also, Danielle has not signed Form 8832 (or a similar statement) to release claiming the child as a dependent to the noncustodial parent. Because Danielle’s mother's AGI is not higher than hers she cannot claim Kyra as a qualifying child on her income tax return. Only can Danielle can claim Kyra as a qualifying child and is entitled, if additional eligibility requirements are met, to which of the following tax benefit?

A. The Child Tax Credit

B. The Credit for Child and Dependent Care Expenses

C. Head of household filing status

D. All of the above

Answer 1

_{Option D : ALL OF THE ABOVE}

_Explanation:

_{1) Taxpayers can claim a child tax credit of up to $2,000 for each child under age 17 who is a citizen. The credit is reduced by 5 percent of adjusted gross income over $200,000 for single parents ($400,000 for married couples). If the credit exceeds taxes owed, taxpayers can receive up to $1,400 of the balance as a refund, known as the additional child tax credit or refundable CTC. The ACTC is limited to 15 percent of earnings above $2,500.}

_{2) The Child and Dependent Care Credit can be worth from 20% to 35% of some or all of the dependent care expenses you paid. The percentage you use depends on your income. If your income is below $15,000, you will qualify for the full 35%. The percentage falls by 1% for every additional $2,000 of income until it reaches 20%.}

_{3) To file as head of household, you must: Pay for more than half of the household expenses. Be considered unmarried for the tax year, and. You must have a qualifying child or dependent.}