EA Exam 2025: Tax Credits - Questions and Answers, Exams of Nursing

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EA Exam 2025 Part

1 - Unit 14: Tax

Credits EXAM WITH

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Child Dependent Care Credit: If the taxpayer receives a reimbursement under an FSA the amount is treated as pre-tax. How must the taxpayer determine the credit? - ANSWER-Qualified expenses - reimbursed amount = Child Dependent Care Credit amount Child Dependent Care Credit: Eligibility tests (5) - ANSWER-1. Qualifying Person Test,

2. Earned Income Test,
3. Work-related expense test,
4. Joint return test,
5. provider identification test. Child Dependent Care Credit: Qualifying Person Test - ANSWER-1. A dependent child under the age of 13 at the time care was provided
6. a spouse who is physically or mentally unable to provide for themselves

Child Dependent Care Credit: Work- Related Expense Test - qualifying expenses - ANSWER-1. Education - preschool or after-school care for children in kindergarten or above.

2. Care outside the home for a child under 13 or in a care center for a disabled dependent.
3. Transportation for a care provider to take a qualifying person to or from a place where care is provided.
4. Fees and deposits paid to an agency or preschool to acquire child care.
5. Household services if they are at least partly for the well-being and protection of a qualifying person. Child Dependent Care Credit: Work- Related Expense Test - non-qualifying expenses - ANSWER-1. Tuition for Kindergarten and above
6. Summer school or tutoring

3. Overnight camps (Day camps generally qualify)
4. Cost of transportation not provided by a care provider.
5. Forfeited deposit to a daycare center. Child Dependent Care Credit: Joint Return Test - ANSWER-Married couples who wish to take the credit must file jointly. If a taxpayer qualifies as HOH they can be considered as unmarried to claim the credit. Only the custodial parent is allowed to claim the credit. Child Dependent Care Credit: Provider Identification Test - ANSWER-The taxpayer must provide the name, address, and tax payer identification number of the person or organization that provided care for the dependent or child. Child Dependent Care Credit: If a childcare/dependent provider refuses to

3. Meet the age criteria at the end of the year (under 17)
4. The child must not have provided more than half of their own support.
5. Must have lived with the taxpayer for more than 6 months of the year.
6. Be a US citizen, US national, OR resident of the US - foreign-born adopted children are eligible if they lived with the taxpayer all year. Additional Child Tax Credit: Eligibility - ANSWER-Available to individuals who do not qualify for the full amount of the non- refundable Child Tax Credit. A taxpayer must be able to claim the Child Tax Credit, even if they cannot claim the full amount, to claim the Additional Child Tax Credit. Additional Child Tax Credit: Limits - ANSWER-1. up to $1,000 for each qualifying child after subtracting the allowable amount of Child Tax Credit.

2. The lesser of : 15% of taxpayers earned income that is greater than $3,000 OR The amount of unused Child Tax Credit. What form is used to report the Child Tax Credit and Additional Child Tax Credit? - ANSWER-Form 8812 - Child Tax Credit A Taxpayer cannot claim the Child Tax credit or Additional Child Tax Credit if they file what form? - ANSWER-Form 2555, Foreign Earned Income Exclusion. Adoption Credit: - ANSWER-A non- refundable credit up to $13,460 per child for qualified expenses; for a special needs child the maximum credit can be taken even if there are no expenses. If the taxpayer received adoption benefits from an employer and would like to claim the adoption credit, how can the do that? - ANSWER-The adoption credit can be

4. Re-adoption expenses to adopt a foreign child. What are expenses are not qualified adoption expenses? - ANSWER-1. illegal adoption expenses
5. a surrogate parenting arrangement
6. Adoption of a spouses child - although expenses paid by a registered domestic partner to adopt his/her partners child qualify. For failed adoptions, can the credit or exculusion be taken? - ANSWER-The credit or exculusion for domestic (US) adoptions may be taken for qualified expenses. When may the credit or exclusions be claimed? - ANSWER-For expenses paid before the year in which the adoption was final or unsuccessful, the expenses may be claimed in the following year (when the adoption was finalized). For the year the

adoption is final the taxpayer may claim the expenses in the current year. In General, education credits may be claimed by the taxpayer for whom? - ANSWER-Credits may be claimed for:

1. the taxpayer
2. the spouse
3. the dependents Who attended an eligible educational institution during the tax year. In general, what is considered an eligible educational institution? - ANSWER-1. Colleges
4. Universities
5. Vocational Schools
6. Community colleges Can a taxpayer claim prepaid payments made for an academic period? - ANSWER- The taxpayer may claim the pre-paid payments for an academic period that

their own return? - ANSWER-Yes, the dependent may claim their expenses on their own return. In General, If a taxpayer claims more than one dependent on their tax return and claims the dependents education expenses, what two credits may they use? - ANSWER-The American Opportunity Credit and Lifetime Learning Credit; these cannot be combined for one dependent. What form is used to figure and claim education credits? - ANSWER-Form 8863 What programs do not qualify for the education credit? - ANSWER-Courses involving sports, games, or hobbies is not a qualifying expense unless the course is part of the students degree program, or is taken to improve job skills (lifetime learning credit)

What expenses do not qualify for the education credit(s)? - ANSWER-1. Room & Board

2. Medical expenses
3. Other insurances costs
4. Transportation costs
5. Personal, living, or family expenses. what form is used to report tuition expenses? - ANSWER-Form 1098-T, Tuition Statement American Opportunity Tax Credit (AOTC/AOC) - ANSWER-Partially refundable credit (up to 40%) The credit allows taxpayers to claim a credit of up to $2,500 based on tuition and related expenses paid for each eligible student. The credit covers 100% of the first $ and 25% of the second $2000 of eligible expenses per student.

AOTC MFJ phase out: - ANSWER-160,

• 180, AOTC Single, HOH, or Widower phase out
• ANSWER-80,000 - 90, when is the AOTC not refundable? - ANSWER-When the taxpayer is subject to the kiddie tax rules Lifetime learning Credit: - ANSWER-non- refundable credit of 20% of qualified tuition, fees, and any amounts paid directly to the educational institution for required books, supplies, and equipment up to $10,000. The maximum is $2,000 per RETURN. If a taxpayer has two dependents who both have qualifying tuition & fees, how much can be claimed on for the Lifetime learning credit? - ANSWER-Up to $2,000 per year, per return.

Can the lifetime learning credit be used for graduate and professional degree certification? - ANSWER-yes, it may be used for all levels of post secondary education, for any courses used to acquire or improve job skills, for any number of courses, and for an unlimited number of years. If a taxpayer has a felony drug conviction and qualifying tuition expenses, what tax credit may they claim? - ANSWER-Lifetime learning credit, they would not qualify for the American Opportunity tax Credit if they have a felony drug conviction. Lifetime learning credit phase-out: Single - ANSWER-$55,000 - $65,000 of MAGI Lifetime learning credit phase-out: MFJ - ANSWER-$111,000 - $131,000 of MAGI

6.Must be a US citizen or legal resident all year. Non-resident aliens married to a US citizen or resident alien filing jointly can still qualify. What is earned income - ANSWER-Income such as wages, tips, union strike benefits, and net earnings from self-employment. Is it earned income? Social Security Benefits - ANSWER-Not Earned Income Is it earned income? Wages - ANSWER- Earned Income Is it earned income? Workfare payments - ANSWER-Not Earned Income Is it earned income? Alimony or Child Support - ANSWER-Not Earned Income Is it earned income? Tips - ANSWER- Earned Income

Is it earned income? Pensions/Annuities - ANSWER-Not Earned Income Savers credit AGI limit: HOH - ANSWER- $46, Savers credit AGI limit: Single, MFS, QW - ANSWER-$30, A taxpayer may claim a residential energy efficiency property credit on a main or second home, up to 30% for: - ANSWER-1. geothermal heat pumps

2. small wind turbines
3. solar energy systems
4. fuel cells Nonbusiness Energy property tax credit types (2) - ANSWER-1. Residential energy property costs
5. qualified energy efficiency improvements