Quiz 9: Tax Credits

Business

Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Tax credit is a form of tax incentive or rebate which is given by government to the taxpayer when taxpayer fulfills certain criteria. One tax credit is equal to one dollar and is subtracted by the tax liability of taxpayer. Tax credits are both refundable and nonrefundable. Dependent is the one who depends on the taxpayers for his expenses and survival and is relative of the taxpayer. Qualifying dependent could be a relative, spouse, child, etc. Qualifying dependent is the one who has passed several test depending upon the relationship with the taxpayer, and taxpayer is allowed to take exemptions on these dependents. The maximum and minimum tax credit for one qualifying child depends on the AGI of the tax payer. The maximum permissible qualifying expense is $3,000 for one child. When AGI of the taxpayer is less than or equal to $15,000 then tax credit provided is maximum i. e. 35% of the actual or permissible expense whichever is less. So, maximum tax credit is $700. When AGI of the taxpayer is more than $43,000 then tax credit provided is minimum i. e. 20% of the actual or permissible expense whichever is less. So, minimum tax credit here is $400.

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Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Tax credit is a form of tax incentive or rebate which is given by government to the taxpayer when taxpayer fulfills certain criteria. One tax credit is equal to one dollar and is subtracted by the tax liability of taxpayer. Tax credits are both refundable and nonrefundable. Dependent is the one who depends on the taxpayers for his expenses and survival and is relative of the taxpayer. Qualifying dependent could be a relative, spouse, child, etc. Qualifying dependent is the one who has passed several test depending upon the relationship with the taxpayer, and taxpayer is allowed to take exemptions on these dependents. The criteria that should be fulfilled to claim credit for child and dependent care expenses are as follows: • The child and dependent care expenses is granted only if taxpayer has minimum one qualifying child or dependent. • The expenses should be actually incurred on the qualifying child or dependent. • The qualifying child or dependent should be the part of the household which is maintained by the taxpayer. • The dependent should be either under age of 13 or the dependent or the spouse is unable to care of himself/herself and lives for at least six months in a year with the taxpayer.

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There is no answer for this question