Question

In 2017, Elaine paid $2,920 of tuition and $840 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? (Round your intermediate calculations to two decimal places and final answer to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

a. Elaine’s AGI is $90,750.

b. Elaine’s AGI is $176,200.

c. Elaine’s AGI is $191,500.

Answer 1

American Oppournity Credit allows an individual to take credit of the expenditure incurre in the 1st four years of the higher education . The maximum limit provided under tha act is $ 2500( i.e. 100 % of the first $ 2000 qualifying Expense and 25% of the next $ 2000 qualifying expense.

Further, if AGI is :

less than $ 80000 for single tax payer ( $ 160000 if married and filing jointly) than they can claim 100 % of the credit

Between $ 80000 and $ 90000 for single tax payer (Between $ 160000 to $ 180000 if married and filing jointly) than they can claim partial credit

more than $ 90000 for single tax payer ( $ 180000 if married and filing jointly) than zero credit shall be available

Now, as given in question :

1. If Elaine's AGI is $ 90750, than maximum credit available is 2440(i.e. 2000+25% (920+840))

2. If Elaine's AGI is $ 176200, than first we have find out the difference between maximum aalowe AGI and Elaine's AGI i.e. $ 180000- $ 176200=$ 3800

Than we have to convert it into percent taking $ 20000 as base. i.e. 3800/20000*100= 19 %

Now,maximum available credit is calcultaed as 2440* 19%= $ 463.6

3 If Elaine's Agi is more than $ 191500, than she will not be able to claim credit as its more than the limit of $ 180000