Joe reported $330,000 AGI and $300,000 taxable income on his head-of-household tax return for the current year. Joe has four dependent children: Beatrice, age 19; Bruce, age 16; Angie, age 11, and Arnold, age 8. Compute Joe's child tax credit for the current year, if any.

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Question restatement: Joe has AGI of $330,000 and taxable income of $300,000, filing head of household with four dependents: Beatrice (19), Bruce (16), Angie (11), Arnold (8). Compute Joe's child tax credit for the current year, if any. Answer options: "$0", "$1,500", "$5,000", "$6,500".

Option 1: "$0". To understand this, first identify qualifying children for the child tax credit (CTC). Only children under age 17 at year-end qualify. Beatrice, age 19, does not qualify, so there are three qualifying children (Bruce, Angie, Arnold). The base CTC is $2,000 per qualifying child, which would total $6,000 if none of the credits were phased out. However, the CTC is subject to an income-based phaseout. For head-of-household filers, the phaseout threshold is $200,000 of AGI. The amount by which AGI exceeds the threshold is $330,000 − $200,000 = $130,000. The phaseout rate is 5%, so the phaseout amount is 5% × $130,000 = $6,500. Subtracting the phaseout from the base credit gives $6,000 − $6,500 = −$500, which is capped at $0. Therefore, the credit is $0.

Option 2: "$1,500". This would imply an electing to take a partially phased-out credit that is not consistent with the standard 5% phaseout calculation described above. The total base CTC for three qualifying children is $6,000, and the actual phaseout amount would reduce this to zero or a positive smaller amount depending on exact calculations. Simply claiming $1,500 ignores (a) the number of qualifying children (three, not four) and (b) the full 5% phaseout applied to the excess AGI over the threshold, making this option inaccurate given the numbers.

Option 3: "$5,000". This would assume a large but not full grant of the CTC: $6,000 base minus some phaseout. However, with a $130,000 excess above the $200,000 threshold, the 5% phaseout equals $6,500, which exceeds the $6,000 base credit, resulting in a zero credit, not $5,000. The mismatch here comes from applying a partial phaseout that falls short of the required $6,500, which contradicts the standard calculation.

Option 4: "$6,500". This figure matches the calculated phaseout amount (5% of the $130,000 excess). However, the actual tax credit cannot exceed the base credit for three qualifying children, which is $6,000. Since the phaseout would reduce the credit below the base total, the final credit is not $6,500; it becomes $0 after applying the phaseout to the $6,000 base amount. Selecting $6,500 would overstate the credit and ignore the limit imposed by the three qualifying children’s base credit.

SU25-BL-BUS-A329-2695 Quiz 10

Joe reported $330,000 AGI and $300,000 taxable income on his head-of-household tax return for the current year. Joe has four dependent children: Beatrice, age 19; Bruce, age 16; Angie, age 11, and Arnold, age 8. Compute Joe's child tax credit for the current year, if any.

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