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.

EXHIBIT 8-8 Child Tax Credit Phase-Out Threshold

Filing Status	Phase-Out Threshold
Married filing jointly	$400,000
Married filing separately	200,000
Head of household and single	200,000

b. His AGI is $420,000.

c. His AGI is $420,100, and his daughters are ages 10 and 12.

Answer 1

b

Since one daughter is age 17, no child tax credit will be available for her.

For AGI above the phase out threshold, $ 50 is reduced for every 1,000

In this case it is 420,000 - 400,000 = 20,000
Reduction = 20,000 / 1,000 X 50 = 20 X 50 = 1,000

Eligible child tax credit = 2,000 - 1,000 + 500 = $ 1,500

c

In this case credit would be available for both daughters

Reduction would be 20,100 / 1,000 = 21 X 50 = 1,050

Child tax credit = 2 X 2,000 - 1,050 = 2,950

Eligible credit = 2,950