Question

Bob and Serena are married and file a joint income tax return. For 2017, their modified AGI is $70,000. Their daughter, Dawn, is in her third year at State University. They paid $4,300 for Dawn's tuition. What is the American Opportunity Credit (AOC) that Bob and Serena can claim?

$0

$860

$2,150

$2,500

Answer 1

Ans (D) - $2500

Conditions to avail tax credit

1. The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses for a student for the first four years of post-secondary education.

2. Generally, a taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student.

Both the condition have been satisfied in this case & The American Opportunity Credit can save a household with a qualifying student as much as $2,500. Eligible students can claim 100 percent of the first $2,000 spent on acquiring materials for school, and another 25 percent of the next $2,000 in expenses. In this case, the tuition fee is $4300 so the max they can avail is $2500 as per condition.