Question

Neville and Julie are married and have two children ages 19 and 14. Their adjusted gross income for the year is $85,200.

Round all calculations (including all fractions) up to the next whole number.

a. Neville and Julie can claim $______ as a child credit.

b. They can claim $ ______ for the child credit if their children are ages 16 and 13.

c. Assume the same facts as part a except that their adjusted gross income is $430,000. Neville and Julie are allowed a child credit of $______. Their child credit is reduced by $______ due to their adjusted gross income.

Answer 1

Answer a) Neville and Julie can claim a child credit of $2000. That is 2000*1 (Only one child under the age of 17 can claim child credit of $ 2000 each). In this question only 14 aged child can claim and not for 19 aged child. "The definition of a qualifying child is similar to the definition of a qualifying child for dependency purpose except that the child must be under the age of 17 at the end of the tax year" b) In this case both children can claim a child credit of 2000 each because of both children are under 17 years of age. Hence Neville and Julie can claim a child credit of $4000 (2000*2) c) Neville and Julie are allowed a child credit of $ 1900 ($2000-$100). Their child credit is reduced by $ 100 (5% of $2000) due to their adjusted gross income. (In this case the families gross income is more than $ 400,000. So the child credit shall be reduced by 5%) Note: Tax payers can claim a child tax credit (CTC) of up to $2000 for each child under age 17 who is a citizen. The credit is reduced by 5 percent of adjusted gross income over $ 200,000 for single parents and $ 400,000 for married couples