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Taxation and Regulation/Blueprint/4.C

Tax credits and payments

Area 4: Federal Taxation of Individuals (22-32%)

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Topics

  • Child tax credit and earned income credit
  • Education credits
  • Estimated tax payments

Lessons

  • Individual Taxation: Credits and AMT

Study Frameworks

Individual Tax Formula

Individual Income Tax Computation
Gross Income (§61)
Wages, salaries, tips
Interest and dividends
Business income (Sch C)
Capital gains/losses
Rental income (Sch E)
Alimony (pre-2019 agreements)
Adjustments (Above the Line)
IRA contributions
Student loan interest
Self-employment tax (50%)
HSA contributions
Alimony paid (pre-2019)
Adjusted Gross Income (AGI)
Deductions (Below the Line)
Standard deduction OR
Itemized deductions (Sch A)
Taxable Income
Tax Computation
Apply tax rate brackets
− Credits (nonrefundable, then refundable)
+ Self-employment tax, AMT, etc.
− Payments and withholding
Tax due or refund

Tax Credits Overview

Tax Credits
Nonrefundable Credits
Child and Dependent Care Credit
Lifetime Learning Credit
Adoption Credit
Foreign Tax Credit
General Business Credit
Refundable Credits
Earned Income Credit (EIC)
Child Tax Credit (refundable portion)
American Opportunity Credit (40%)
Premium Tax Credit

Child Tax Credit

$2,000 per qualifying child under 17

Phases out at $200K (single) / $400K (MFJ). Up to $1,700 refundable as Additional CTC.

Foreign Tax Credit Limitation

(Foreign Source Taxable Income ÷ Worldwide Taxable Income) × U.S. Tax Liability

Computed separately for each basket (general and passive). Excess credits carry back 1 year, forward 10 years.

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