HW Chapter 12 - Word Monica Houck- File insert Draw Design Layout References Mai
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HW Chapter 12 - Word Monica Houck- File insert Draw Design Layout References MailingsReview Tell me what yau want to da Home Cul Copy Format Painter Calibri Bedy) AaBoccDo Replace A Aa Normal 1 Na Spac.Heading 1 Haing Title btite Subtle Em... Emphasis Interse E Select ipbaan1 Eciting 5 A freshman's single-parent family has a modified adjusted gross income of $35,000 and tuition expenses of $10,000 after scholarships. The student started in January 2015 so all of the tuition was paid in 2015. vhich of the three deductions and credits descnbed in here is the most valuable? Federal tax deductions and credits for single fliers (2015 Provision for Education Modificd Adjusted Gross Incomoc Expanses Education Deduction American Opportunity Tax Credit Octails MAGI $0 65,000 0-80,000 $80,000 90,000 4C00 S2000 100% of first $2000 + 25% of next 2000 Phase out bracket $2C00 000 8O.DDD Lifetime Learning Credit 0-65,000 Page 2 of 2 343 wores +10959 1044 PM 1115/2017 2S Type here to searchExplanation / Answer
Below workings are based on tax liability computation for Single status individual ( As mentioned in the Table given):
Calculation of benefit derived from each option:
Step 1: Tax liability with taxable income of 35000:
Tax owed:
Tax= 932.5 + (35000-9325)* 15%= 4783.75
Step 2: calculation of tax owed after using given options
Option A: Education and tuition fee deduction:
Since Modified AGI is with in 65000 limit, upto 4000 of the expense can be claimed as deduction by deduction and taxable income after deduction= 35000-4000= 31000
Tax liability= 932.5 +(31000-932.5)*15%= 4183.75
Tax benefit of using option A= 4783.75 -4183.75= 600
Option B:
American opportunity tax credit:
Tax credit available= 100% of first 2000 expenses + 25% of next 2000
Credit= 2000*100% + 2000*25%= 2500
This credit reduces tax liability directly by 2500, hence value of this option= 2500
Option C:
Life time learning credit:
Tax credit available= 20% of 10000 qualified expenses
Credit= 10000*20%= 2000
This credit reduces tax liability directly by 2000, hence value of this option= 2000
Result:
Maximum benefit is available with Americian opportunity credit option with a value of 2500
Rate Taxable Income Bracket Tax Owed 15% $9,325 to $37,950 $932.50 plus 15% of the excess over $9,325Related Questions
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