Which tax credit are the Mellons qualified to use against their income tax liability?

To determine the tax credit that the Mellons are qualified to use against their income tax liability, it is essential to first recognize the specific nature of the credits being referenced.

The correct answer indicates that only the second credit is applicable. This implies that the Mellons meet the necessary criteria or requirements for that specific credit, which could involve considerations such as income limits, expenses incurred, or other qualifying criteria set forth by tax legislation.

In many cases, tax credits can be dependent on specific activities, eligibility based on adjusted gross income, family dynamics (such as dependents), or qualifying expenditures. The second credit may offer benefits that align with the Mellons' situation, such as educational expenses, child care, or energy efficiency improvements.

By contrast, the first credit—while potentially beneficial—does not meet the criteria necessary for the Mellons to claim it, potentially due to factors such as income limits or the nature of the expenses being disqualified.

This focus on eligibility is critical in tax planning, as it ensures that taxpayers are maximizing their available credits while adhering to tax regulations. Therefore, understanding the qualifications for these tax credits helps the Mellons effectively reduce their tax liability.