Video: Introduction to Computation of Tax and Credits

In this lesson, Nick Palazzolo, CPA, unpacks the mechanics of tax credits, detailing their significance in both the CPA exam and potential real-world applications. He unveils the rationale behind the existence of various tax credits, explaining how they serve to incentivize behaviors beneficial to society, like the adoption of children or investment in renewable energy. Utilizing a clear and approachable method, Nick stresses the necessity for memorizing credit amounts and phase-out ranges, and prepares for the application of this knowledge to simulations involving Form 1040. By comparing credits to deductions, he illustrates their unique impact on a well-functioning tax system, ultimately framing tax credits as a crucial element in promoting societal welfare.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Diving into our tax and credits, these are going to be critically important. We got we love credits us as taxpayers. We love them. Why is that? Well, it's money back. We get to save some money and we're going through. We're here to pass the CPA exam. And if you learn a little bit extra from here that will help you on your own personal tax situation. That's just an added benefit. We're here to help you as much as we can. Now, your personal situation or the situation of a theoretical taxpayer that will see could involve a lot of different credits or maybe no credits at all. Totally depends. And why is that? Well, credits exist for the IRS to influence our actions and by extension, the government tax laws are arbitrary. Excise taxes exist on things such as cigarettes and alcohol to, in theory, prevent people from engaging in activities that are harmful for them, right? It makes it more expensive to purchase things that are harmful. Similarly, credits could also lead to certain behaviors. As we will see, there's a credit, not too important to know, but it's just a credit exists for solar and renewable energy. That's a credit where you as a taxpayer will get a benefit from the IRS, from the government for engaging in an activity that's better for society at large. So that's kind of a nice little intro before the intro. I got a super intro. Yeah, this is going to be essential for all of what we have to see here. These are going to be a lot of memorization based, right? So make sure you're taking a look in the resources, memorizing all of the credit amounts, all the phase out amounts and ranges will go through

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Federal Taxation of Individuals: Passive Activity, & Tax Credits

Module: 2 Concepts, 28 Videos

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Introduction to Passive Activity Losses and Loss Limitations

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Tax Basis vs. At-Risk Basis