Question

You have AGI of $50,000. You have two, twin dependents which are full time students. You paid tuition of $18,000 in the current year, $9,000 for each student. Both students are obtaining their first degree and it is their 4th year of school. They are not convicted of a drug felony. What is the amount of your education credit?

Answer 1

The amount of total education credit is $5,000

For both students $2,500 + $2,500

• The American Opportunity Tax Credit (AOTC) is a partially refundable tax credit that provides up to $2,500 per student per year to pay for college. The tax credit is based on up to $4,000 in eligible higher education expenses, equal to 100% of the first $2,000 in eligible expenses and 25% of the second $2,000.
• Eligible expenses include tuition, fees and course materials. Course materials include textbooks, supplies and equipment. Amounts spent on living expenses (room and board, transportation and health care) are not eligible. Expenses for sports, games, hobbies and non-credit courses are not eligible unless part of the degree program. Application fees and admissions test fees are not eligible.
• The American Opportunity Tax Credit is claimed per eligible student, not per taxpayer, unlike the Lifetime Learning Tax Credit. So parents can claim the tax credit for more than one child if they have multiple children in college.
• To be eligible, the student must be enrolled in college on at least a half-time basis for at least one academic term that begins during the tax year. Eligible expenses that are incurred during the first three months of the next year may be counted as though they were paid in the current year.
• The income phase-outs are $160,000 to $180,000 for married taxpayers filing jointly and $80,000 to $90,000 for single filers. Married taxpayers who file separate income tax returns are not eligible.