Question

M is a single mom raising one child, age 16, at home. M may claim a dependency exemption for her child. This year M earned $70,000 as slary and had investment income of $12500. Determine the allowable child tax credit for M.

Answer 1

Maximum child tax credit for single taxpayer is $1,000 if her income is less than $75,000.

The child tax credit reduces by $50 for every $1,000 by which the taxpayer's AGI exceeds the threshhold amount.

M's AGI = Salary + Investment income = $70,000 + $12,500 = $82,500

Excess of M's AGI over the threshhold amount = $82,500 - $75,000 = $7,500

Therefore,

Reduction in M's child tax credit = $50 x 7 = $350

Thus,

Allowable child tax credit for M = $1,000 - $350 = $650.