ExpertHard1 markMultiple Choice
CPA · Question 34 · Area 3: Individual Taxation
A taxpayer has 2 qualifying children (under age 17). Their tax liability before credits is 0. Their earned income is ,000. What is the amount of the Child Tax Credit they can claim as a REFUND (Additional Child Tax Credit)? (Assume current tax year rules, max refundable approx ,700 per child).
A taxpayer has 2 qualifying children (under age 17). Their tax liability before credits is 0. Their earned income is ,000. What is the amount of the Child Tax Credit they can claim as a REFUND (Additional Child Tax Credit)? (Assume current tax year rules, max refundable approx ,700 per child).
Answer options:
A.
,000
B.
0
C.
,400
D.
,825
How to approach this question
Refundable CTC (ACTC) = Lesser of: 1. Unused credit, 2. Refundable Cap (e.g., 1,700/child), 3. 15% * (Earned Income - 2,500).
Full Answer
C.,400✓ Correct
,400
The Additional Child Tax Credit is limited to 15% of earned income over ,500, capped at the refundable limit per child (assumed ,700 for this question). 15% * (28,000 - 2,500) = 3,825. Cap is 2 * 1,700 = 3,400. Refund is 3,400.
Common mistakes
Ignoring the per-child refundable cap or the ,500 floor.
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