credit for the elderly? what is that??
Mr. Klein is 67 years old, single, and retired. During 2014, he received a taxable pension from his former employer in the amount of $4,000. His adjusted gross income is $12,450, and he received $500 of nontaxable Social Security benefits. His tax before credits is $75. What is Mr. Klein’s credit for the elderly?
A. $75
Answer (A) is correct.
An individual who has attained age 65 is allowed a credit equal to 15% of the individual’s reduced base amount. For a single individual, the initial base amount is $5,000, reduced by any amounts received as Social Security benefits or otherwise excluded from gross income. The base amount is also reduced by one-half of the excess of AGI over $7,500 (for a single individual).
Initial base amount
$5,000
Less AGI limitation
[($12,450 – $7,500) × 50%]
(2,475)
Less Social Security benefits
(500)
Reduced base amount
$2,025
× .15
Klein’s credit for the elderly
$ 304
Since the taxpayer’s tax before credits is $75, only $75 of the credit can be claimed.
B. $379
C. $0
D. $304
.