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Tax Computation and credits (Tax Credits (Education tax incentives (The…
Tax Computation and credits
Individual income tax calculation and limitations
Reduced rate for Qualified dividends, long-term capital gains
Marginal tax rate
Tax Credits
Child and dependent care credit
20%-30% of eligible expense, up to 3k for one, 6k for more
Credit fro the elderly and/or permanently disabled
(Base-all social security-1/2 of adjusted gross income over the stated max) * 15%
Education tax incentives
The American opportunity credit: may be refundable
The lifetime learning credit : 2k max; one student per year
Coverdell Education savings account distributions : can't be used for the same education expense as AOC & lifetime
AOC+ lifetime: using both in same year on different kids is ok
Qualified Tuition programs(QTP)
Adoption credit
Retirement savings contribution credit
Foreign tax credit
Lesser of (1) foreign tax paid or (2) foreign tax credit limit
General business credit
Work opportunity credit: available to employers hire employees from a targeted group
Child tax credit: may claim $1k for each "qualifying child" ; Refundable
Earned income credit ( refundable)
Withholding tax ( paycheck credit): refund or credit to next year
Excess FICA( social security tax withheld): from 2 or more employers. One employer not allowed.
Small employer pension plan start-up costs credit: up to $500 per year for 3 yrs
Small business health care tax credit: up to 50% of employer's cost of the premium
Residential energy credits: max 30%
Premium Tax Credit ( PTC)
Tax Credit in general
Personal tax credits: reduce tax, no refund
Refundable credits: reduce tax & can get a refund
Estimated tax and inadequate withholding
Tax payments
Estimated tax paid
Excess social security tax withheld
Tax withheld from paychecks
Estimated tax ( required minimum): due to other income, not salary
1k or more tax liability
Inadequate tax estimates
Failure to pay estimated taxes ( penalty)
Withholding tax treated as estimated payments