Tax Credits and Deductions discussion

Chapt 9.

46. Tim and Martha paid 7000 in qualified employment-related expenses for their three young children who live with them in their household. Martha received 1800 of dependent care assistance from her employer, which was properly excluded from gross income. The couple had 57000 of AGI earned equally.

  • What amount of child and dependent care credit can they claim on their Form 1040?
  • How would your answer differ (If at all) if the couple had AGI of 36000 that was earned entirely by Tim?

53. In 2016, Jeremy and Celeste, who filed a joint return, paid the following amounts for their daughter, Alyssa, to attend the University of Colorado during the academic year 2016-2017. Alyssa was in her first year of college and attended full time.

Tuition and fees (for fall semester 2016)1950

Tuition and fees (for spring semester 2017) 1000

Books 600

Room and Board 1200

The spring semester at the University of Colorado begins in January. In addition to the above, Alyssa’s Uncle Devin sent 800 for her tuition directly to the university. Jeremy and Celeste have modified AGI of 165000.

  • What is the amount of qualifying expenses for the purpose of the American opportunity tax credit (AOTC) in tax year 2016?
  • What is the amount of the AOTC that Jeremy and Celeste can claim based on their AGI?

Chapt 10.

49. Allison is paid 1025 per week. What is the amount of federal income tax withheld from Allison’s pay check under the following conditions? Use the percentage method table in the Appendix to this chapter

a. Allison is single and claims two withholding allowances

b. Allison is married and claims two withholding allowances

c. Allison is single and claims no withholding allowance.

57. Lauprechta Inc. Company has the following employees on Payroll:

Semimonthly Payroll

Withholding allowances

Marital Status

















Complete the table for taxes to be withheld for each pay period:

Federal withholding tax

Social Security Tax

Medicare Tax

Total Taxes Withheld





Chapt 11.

49. Will, who is single and age 50, is employed as a full-time tax accountant at a local manufacturing company where he earns 73000 per year. He participates in a pension plan through his employer. Will also operates a small tax practice in his spare time during tax season and has net Schedule C income of 8000. He is interested in establishing and contributing to other retirement plan.

  • What options are available to Will ?

52.Ken is self-employed architect in a small firm with four employees: himself, his office assistant, and two drafters, all of whom have worked for ken full-time for the last fur years. The office assistant earns 30000 per year and each drafter earns 40000. Ken’s net earnings from self-employement (after deducting all expenses and one-half of self-employement taxes) are 310000. Ken is considering whether to establish a SEP plan and has a few questions:

a. Is he eligible to establish a SEP plan ?

b. Is he required to cover his employees under the plan ? why or why not ?

c. If his employees must be covered, what is the maximum amount that can be contributed on their behalf ?

d. If the employees are not covered, what is the maximum amount Ken can contribute for himself ?

e. If Ken is required to contribute for his employees an chooses to contribute the maximum amount, what is the maximum amount Ken can contribute for himself ? (Hint: Calculate the employee amounts first) Ignore any changes in Ken’s self-employement tax.