Question

In 2017 Sara and Scott have one child, Randy, who is 8 years old. They file as married filing jointly and claim the child tax credit for Randy. Their AGI in 2017 was $112,700. How much is their total child tax credit?

Select one:

a. $850

b. $0

c. $1,000

d. $2,000

In 2018 Cornelia, a single taxpayer with AGI of $63,000, spends $25,000 in tuition for her master's degree. What type and amount of education credit can she claim?

Select one:

a. $2,500 of American Opportunity Tax Credit

b. $2,000 of Lifetime Learning Credit

c. $1,000 of Lifetime Learning Credit

d. She cannot claim any education credit

Answer 1

Answer 1:

Threshold for married couples filing joint returns = $110,000

Child tax credit reduction basis : For each $1,000 of income above the threshold, available child tax credit is reduced by $50.

Excess of AGI above threshold for Sara and Scott = $112,700 - $110,000 = $2700

Now, for $2,700 the child tax credit will be reduced by $50*3 = $150

Answer: (a) $1,000 - $150 = $850

Answer 2:

Students pursuing a masters degree may be able to receive a tax credit of up to $2,000 for qualified educational expenses. The credit is equal to 20% of up to $10,000 of the student’s qualified educational expenses. Examples of qualified educational expenses include tuition expenses.

Eligible credit has been computed by taking 20% of the first $10,000 of the qualified educational expenses paid during the taxable year. Thus, $10,000*20% = $2,000

Answer: (b) 2,000 of Lifetime Learning credit