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Collection of 1,000 Questions - Retirement Planning - Question 5 of Income Tax, Annuities and Strategies

Posted by David Gobeil on

For 2019, the Clawback Threshold for The Federal Age Tax Credit is $37,790. The solution erroneously used the Clawback Threshold for 2018 of $36,976.

Wilma who is 68 years of age earns $42,090 as a consultant. For 2019, the age amount is $7,494, the clawback threshold is $37,790 and the income level cut-off for the age amount is $87,750.

What is the amount of Wilma's federal age tax credit?

Solution

The amount for Wilma's federal age tax credit after the clawback is $6,849.00, calculated as:

  • (the greater of ($0 and (age amount - (the greater of ($0 and ((net income - threshold) × clawback rate of 15%)))))); or
  • (the greater of ($0 and ($7,494 - (the greater of ($0 and (($42,090 - $37,790) × 15%)))))); or
  • (the greater of ($0 and ($7,494 - (the greater of ($0 and ($4,300 × 15%)))))); or
  • (the greater of ($0 and ($7,494 - $645.00))).

So, the amount of Wilma's federal age tax credit is $1,027.35, calculated as:

  • (amount for the federal age tax credit after the clawback × conversion rate); or ($6,849.00 × 15%).

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