Assignment 11

Assignment week 12

Chapter 6 Credits and Special Taxes.

12. The reason there are education tax credits in the tax law are to help qualifying low- and middle-income individuals defray the cost of higher education.

13. The American Opportunity credit is available for only 4 years of postsecondary education whilst the Lifetime Learning Credit is available for all years of postsecondary education for courses to acquire or improve job skills.

14. a) 100% * 2000 = $2000

25% * 2000 = $500

2500*((180,000 – 170,000)/20000) = $1,250

b) 100% * 2000 = $2000

25% * 2000 = $500

2500*((90,000 – 75,000)/20000) = $1,875

18. 0

19. (0.3 * 6000) $1,800

20.

21. State Income Taxes and State disability insurance.

22. Married taxpayers with several children living in a state with high state income taxes and property taxes may be paying AMT because their state income taxes and property taxes are not allowed as a deduction in the AMT calculation.

23. The AMT has become a controversial tax in recent years because unlike in past years, middle class taxpayers now pay alternative minimum tax due to the reduction in regular taxes in recent years which have not been matched by a reduction in AMT tax rates.

24. 26% of the first $175,000(87,500 for married taxpayers filing separately), 28% on amounts above $175,000.

25. Regular taxable income

+/- AMT preferences and adjustments

= alternative minimum taxable income

- AMT exemption

= amount subject to AMT

*AMT tax rate(s)

= tentative minimum tax

- regular tax

= amount of AMT due with tax return if a positive amount.

26. the provision outlines that parental tax rates are applied to children 18 and younger at or students ages 19 through 23 who have net unearned income for the year. If this net income is zero or less the child’s tax is calculated using the child’s tax rate , but if the amount is above zero the child’s tax is calculated by applying the parent’s tax rate, if higher to that amount. A parent is...