Question

Matthew graduates from high school in 2019 and enrolls in college in the fall. Her parents (who file a joint return) pay $14,225 for her tuition and fees.

If required, round your computations to the nearest whole value.

a. Assuming Matthew's parents have AGI of $164,800, what is the American Opportunity tax credit they can claim for Matthew?
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b. Assuming Matthew's parents have AGI of $65,920, what is the American Opportunity tax credit they can claim for Matthew?

Answer 1

Amarican opportunity tax credit provides a tax benefit for the person's payaing the education exepenses towards the qualifying education of self, or spouse or other dependent person claiming in the tax return. It can give an annual credit up to 2500dollars per eligible student. Along with that, if the credit brings the tax liability zero, then you will get a refund of 40%of the remaining amount limited to 1000dollars.

Qualifying education are

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period* beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

If the income of the parents who is jointly filing the return is less than 160000dollars, they will get a reduced amount of credit .

a)since the agi is more than 160000 they won't get full amount deduction but a reduced amount.

B) since the agi is only 65920., They are eligible to deduct 100%of first 2000dollars spend and 25%of next 2000dollars.. so they will get a tax credit of 2500dollars. Also if there is no tax liability for the parents, then they are eligible for refund of an amount of 1000dollars