Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000.Justin has the following credits: Calculate Justin's tax liability after credits.
A) $190,000.
B) $194,000.
C) $195,000.
D) $200,000.
E) None of the above.

Question

Prior to the effect of the tax credits,Justin's regular income tax liability is $200,000 and his tentative AMT is $195,000.Justin has the following credits:  Calculate Justin's tax liability after credits.
A) $190,000. 
B) $194,000. 
C) $195,000. 
D) $200,000. 
E) None of the above.

Quizplus · Accepted Answer

We need to calculate Justin's tax liability after credits, which means we need to subtract his credits from his regular income tax liability before comparing it to his tentative AMT. 
Using the given tax credits, we can calculate Justin's total credits as:
$4,000 (child tax credit) + $2,000 (education credit) = $6,000 
Therefore, his tax liability after credits is:
$200,000 (regular income tax liability) - $6,000 (credits) = $194,000 
This is less than his tentative AMT of $195,000, so the answer is B: $194,000.

Prior to the Effect of the Tax Credits,Justin's Regular Income