Question

Alan 27 and Kara 26 are married filing a joint return. Both were full time students all year at Buffalo State College. During the year Alan paid $5000 in tuition and fees substantiated with Form 1098-T. Kara paid $3,900 in tuition and fees, also substantiated with Form 1098-T. Both Alan and Kara have a part-time job outside of school. They did not receive any scholarships during the year. Their AGI is $45,000. Their total tax on line 11 of form 1040 is $2,142. They had no additional taxes. Both Alan and Kara meet all the requirements to qualify for the American Opportunities Tax Credit.

Complete form 8863, Education Credits (American Opportunities and Lifetime Learning Credits) for Alan and Kara. You should also complete the Credit Limit Worksheet.

Answer 1

In this case

Alan 27 and Kara26 are married filing a joint return. Both were full-time students all year at Buffalo State College.

They are paying Tuition fees of 5000/- & 3900/- respectively.

Their AGI Doesn't more than 90000/- individually and 180000/- Jointly, so they are eligible for  "American Opportunities and Lifetime Learning Credits"

How to Calculate "American Opportunity Credit"

100% For first 2000/- of the eligible amount = 2000

25% For Second 2000/- of the eligible amount = 500

Maximum 2500/-

Alan 27

Totally 5000 Eligible amount

100% For first 2000/- of the eligible amount = 2000

25% For Second 2000/- of the eligible amount = 500

Total 2500/-

Kara26

Totally 3900 Eligible amount

100% For first 2000/- of the eligible amount = 2000

25% For Second 1900/- of the eligible amount = 475

Total 2475/-