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Their AGI is $28,000, consisting of $5,000 of wages and $23,000 of lottery winnings (unearned income). Note: Round your intermediate calculations to the nearest whole dollar amount. Their AGI is $10,000, consisting of $10,000 of lottery winnings (unearned income).

Their AGI is $28,000, consisting of $5,000 of wages and $23,000 of lottery winnings (unearned income). Note: Round your intermediate calculations to the nearest whole dollar amount. Their AGI is $10,000, consisting of $10,000 of lottery winnings (unearned income).

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 2022, Amanda and Jaxon Stuart have a daughter who is 1 year old. The Stuarts are full-time students and are both 23 years old. Their only sources of income are gains from stock they held for three years before selling and wages from part-time jobs.

What is their earned income credit in the following alternative scenarios if they file jointly? 

  1. Their AGI is $28,000, consisting of $5,000 of wages and $23,000 of lottery winnings (unearned income).

    Note: Round your intermediate calculations to the nearest whole dollar amount.

  2. Their AGI is $10,000, consisting of $10,000 of lottery winnings (unearned income).
### Earned Income Tax Credit (EITC) Table This table provides detailed information regarding the Earned Income Tax Credit (EITC) for different categories of qualifying children and filing statuses for the tax year. #### Columns Description: 1. **Qualifying Children**: Number of qualifying children for which the credit can be claimed. 2. **Maximum Earned Income Eligible for Credit**: The greatest amount of earned income you can have to be eligible for the maximum credit. 3. **Credit %**: The percentage rate used to determine the maximum credit. 4. **Maximum Credit**: This is calculated as (Maximum Earned Income Eligible for Credit) × (Credit %). 5. **Credit Phase-Out for AGI (or earned income if greater) Over This Amount**: Beginning income level where the credit starts to decrease. 6. **Phase-Out Percentage**: Rate at which the credit decreases after passing the phase-out income. 7. **No Credit When AGI (or earned income if greater) Equals or Exceeds This Amount**: The income level at which the credit is completely phased out. #### Taxpayer Categories: - **Married taxpayers filing joint returns** - **All taxpayers except married taxpayers filing joint returns** ##### Married taxpayers filing joint returns: - **0 children**: - Maximum Income: $7,320 - Credit %: 7.65% - Max Credit: $560 - Phase-Out Start: $15,290 - Phase-Out %: 7.65% - No Credit Income: $22,610 - **1 child**: - Maximum Income: $10,980 - Credit %: 34% - Max Credit: $3,733 - Phase-Out Start: $26,260 - Phase-Out %: 15.98% - No Credit Income: $49,622 - **2 children**: - Maximum Income: $15,410 - Credit %: 40% - Max Credit: $6,164 - Phase-Out Start: $26,260 - Phase-Out %: 21.06% - No Credit Income: $55,529 - **3+ children**: - Maximum Income: $15,410 - Credit %: 45% - Max Credit: $6,935 - Phase-Out
Transcribed Image Text:### Earned Income Tax Credit (EITC) Table This table provides detailed information regarding the Earned Income Tax Credit (EITC) for different categories of qualifying children and filing statuses for the tax year. #### Columns Description: 1. **Qualifying Children**: Number of qualifying children for which the credit can be claimed. 2. **Maximum Earned Income Eligible for Credit**: The greatest amount of earned income you can have to be eligible for the maximum credit. 3. **Credit %**: The percentage rate used to determine the maximum credit. 4. **Maximum Credit**: This is calculated as (Maximum Earned Income Eligible for Credit) × (Credit %). 5. **Credit Phase-Out for AGI (or earned income if greater) Over This Amount**: Beginning income level where the credit starts to decrease. 6. **Phase-Out Percentage**: Rate at which the credit decreases after passing the phase-out income. 7. **No Credit When AGI (or earned income if greater) Equals or Exceeds This Amount**: The income level at which the credit is completely phased out. #### Taxpayer Categories: - **Married taxpayers filing joint returns** - **All taxpayers except married taxpayers filing joint returns** ##### Married taxpayers filing joint returns: - **0 children**: - Maximum Income: $7,320 - Credit %: 7.65% - Max Credit: $560 - Phase-Out Start: $15,290 - Phase-Out %: 7.65% - No Credit Income: $22,610 - **1 child**: - Maximum Income: $10,980 - Credit %: 34% - Max Credit: $3,733 - Phase-Out Start: $26,260 - Phase-Out %: 15.98% - No Credit Income: $49,622 - **2 children**: - Maximum Income: $15,410 - Credit %: 40% - Max Credit: $6,164 - Phase-Out Start: $26,260 - Phase-Out %: 21.06% - No Credit Income: $55,529 - **3+ children**: - Maximum Income: $15,410 - Credit %: 45% - Max Credit: $6,935 - Phase-Out
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