Question

Walt and Deloris, who file a joint return, have two dependent children, Bill and Tiffany. Bill is a freshman at State University, and Tiffany is working on her graduate degree. The couple paid qualified expenses of $3,900 for Bill (who is a half-time student) and $7,800 for Tiffany.

1. What education tax credits are available if Walt and Deloris report modified AGI of $117,300?
2. What education tax credits are available if Walt and Deloris report modified AGI of $117,300 and Tiffany is taking one class a semester (is less than a half-time student) and not taking classes in a degree program?

Dependent	Amount of Credit	Type of Credit
Bill
Tiffany
Total

Answer 1

Since Walt and Delrois is a married couple and filed the return jointly and they have modified AGI (MAGI) of $117300 which is less than the limit of $16000, they can claim for the tax credits.

1) Bill and Tiffany are eligible for education tax credits under AOTC

Type of Credit: AOTC (American Opportunity Tax Credit)

Amount of credit:

Bill can claim a credit of $2500 which reduces his tax bill to $3900 - $2500 to $1400

Tiffany can claim a credit of $2500 which reduces his tax bill to $7800 - $2500 to $ 5300

Total : $5000

2) Since Tiffany is a parttime student i.e., less than a half-time student they are eligible for LLC

Type of Credit: LLC (Lifetime Learning Credit)

Amount of credit:

Bill can claim 20% of his expenses i.e., $780

Tiffany can claim 20% of his expenses i.e., $ 1560

Total : $ 2340