Question

Julien and Sarah are married, file a joint return with AGI of $126,000, and have two dependent children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Qualified education expenses for 2019 were $4,000 for Kaya and $5,000 for Christopher.

Compute the following amounts for Julien and Sarah's education credits for 2019 :

a: American Opportunity Credit before any phaseout

b: American Opportunity Credit after any phaseout

c: Lifetime Learning Credit before any phaseout

d: Lifetime Learning Credit after any phaseout

e: Total education credits they can claim

Answer 1

Part B

Total education credit

$1410

Description	Amount	Explanation
(1) AOC before phase-out	5000	[($2,000 × 100%) + ($2000 × 25%)]+((2000*100%)+(2000*25%))
(2) AGI	$126000
(3) Phase-out threshold	160000
(4) Excess AGI	0	(2) – (3) {but not <0 and limited to a maximum of $20,000}
(5) Phase-out range for single taxpayer	20000	$180,000 – 160,000
(6) Phase-out percentage	0%	(4) / (5)
(7) Phase-out amount	0	(1) × (6)
(8) Total AOC after phase-out	$5000	(1) – (7)

Lifetime learning credit before any phaseout = 9000*20% =1800

Lifetime learning credit after any phaseout = 1800-phaseout amount

Phaseout amount = (126000-116000)/20000=50%*1800=900

Lifetime learning credit after any phaseout= 1800-900=900

Therefore,

Part A

American opportunity credit before any phaseout = 5000

Part B

American opportunity credit after any phaseout = 5000

Part C

Lifetime learning credit before any phaseout = $1800

Part D

Lifetime learning credit after any phaseot =900

Part E

Total education credit =5900