Question

In 2018, Elaine paid $3,000 of tuition and $600 for books for her dependent son to attend State University this past fall as a freshman. Elaine files a joint return with her husband. Elaine’s AGI is $168,000.What is the maximum American opportunity credit Elaine can claim for the tuition payment and books?

In 2018, Amanda and Jaxon Stuart have a daughter who is one year old. The Stuarts are full-time students and they are both 23 years old. Their AGI is $25,000, consisting of $6,000 of wages and $19,000 of lottery winnings (unearned income). What is their earned income credit if they file jointly?

Answer 1

Let's start with part A Elaine's Maximum American Opportunity Credit,as per Federal tax, The tution and fees deduction can reduce the amount of your income subject to tax by up to $2500 paid for you, your spouse or your dependents. The amount of credit is 100% of first$2000 of qualified education expenses and 25% of next$2000 of qualified education expenses. To claim full credit your MAGI must be $160000 or less for married filing jointly or you received a reduced amount of credit if your MAGI is over $160000 but less than$180000 for married filing jointly or you can't claim credit if your MAGI is over to $180000 for married filing jointly. In this case Elaine can claim$3400 as American Opportunity Credit. As MAGI is in the range of over $160000 but less than $180000 first $2000 plus 25% of $1600 which is $400.

Part B Amanda and Jaxon Stuart file jointly and their AGI is $2500 including $19000 from lottery winning , their earned income credit will be $3461 as per Federal tax maximum credit is $3461 for married filing jointly and having one child and their AGI should be less than$46010. As lottery winning is considered as income and included in taxable income by the IRS. Income tax is withheld at flat 25% from winning more than $5000 from gambling.