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.

Answer 1

Solution -

Tax credit

The child tax credit is designed to benefit lower- and middle-income level families.

Prior to 2018, the credit is equal to $1,000 per qualifying child, subject to a phase out after a family's income exceeds certain amounts.

In December 2017, the amount per qualifying child was raised to $2,000. Additionally, the phase-out levels of income were also raised.

Age - To qualify for credit child should be less than 17 years of age.. Since 1 daughter age is 14 and other is above 17 year can claim only for 1 child

Since child is dependent and stay with trey and consiering they are US citizen

Credit is subject to a phase-out after income exceeds a certain level. For years prior to the 2018 tax year, the $1,000 credit is reduced by $50 for each $1,000 of income which exceeds $110,000 for married couples filing jointly.

From 2018, the $2,000 credit is reduced by $50 for each $1,000 of income which exceeds $400,000 for married couples filing jointly.

So in above case considering 2018 rate is

a) AGI $100000 = Child credit is $2000

b) AGI $420000 = 2000 - ($50*20) = 1000 Child credit