Question

In 2018, Elaine paid $2,480 of tuition and $1,240 for books for her dependent son to attend State University this past fall as a freshman. Elaine files a joint return with her husband. What is the maximum American opportunity credit that Elaine can claim for the tuition payment and books in each of the following alternative situations? a. Elaine’s AGI is $87,000. b. Elaine’s AGI is $179,000 c. Elaine’s AGI is $233,500.

Answer 1

Solution :-

a. Elaine’s AGI is $87,000 :-

Particulars	Amount
AOC before phase-out	= 2,000 + [ $2,480 + $1,240 -  $2,000 ] * 25% =   2,000 + [ 1,720 * 25% ] = $2,000 + 430 = $2,430
AGI	$87,000
Phase-out threshold	$160,000
Excess AGI	$0
Phase-out range for taxpayer filing as married filing jointly	= 180,000 - 160,000 = $20,000
Phase-out percentage	= $0 / $20,000 = 0%
Phase-out amount	=   $2,430 * 0% = $0
AOC after-phase-out	=  $2,430 - $0 =  $2,430

b. Elaine’s AGI is $179,000 :-

Particulars	Amount
AOC before phase-out	$2,430
AGI	$179,000
Phase-out threshold	$160,000
Excess AGI	= $179,000 - $160,000 = $19,000
Phase-out range for taxpayer filing as married filing jointly	= 180,000 - 160,000 = $20,000
Phase-out percentage	=  $19,000 / $20,000 = 0.95 = 95%
Phase-out amount	= $2,430 * 95% = $2,308.5
AOC after-phase-out	= $2,430 - $2,308.5 = $121.5

c. Elaine’s AGI is $233,500 :-

Particulars	Amount
AOC before phase-out	$2,430
AGI	$233,500
Phase-out threshold	$160,000
Excess AGI	= $233,500 - $160,000 = $73,500
Phase-out range for taxpayer filing as married filing jointly	= 180,000 - 160,000 = $20,000
Phase-out percentage ( maximum percentage is 100% )	= $73,500 / $20,000 = 3.675 = 100%
Phase-out amount	= $2,430 * 100% = $2,430
AOC after-phase-out	= $2,430 - $2,430 = $0

Note :-

(MAGI is balanced gross salary in addition to certain tax-exempt pay from sources outside the United States.) For 2018, the MAGI eliminate go for unmarried people is $80,000 to $90,000. The MAGI eliminate extend for wedded couples recording mutually is $160,000 to $180,000