Question

Kenders and Lisle Einkroft have two children in college this year. They file their income tax return under the filing status of married filing jointly and will have adjusted gross income this year of $120,000. They have paid $9,000 for tuition for their daughter, Ginger, who is a freshman in college this year. They have also paid $500 for books and $700 for tuition for their son, Miles, who is in his junior year at the same college. What is the amount of American Opportunity Tax Credit that the Einkrofts can claim on their tax return this year? O a. $3,700 b. $5,200 OC $9,700 d. $10,200

Answer 1

Option A is correct.

Explanation

The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.

For Ginger

Total turion fees paid $ 9000

For first $2000 100% of education expense is taken as credit = $2000

For next $2000 25% of education expense is taken as credit = $250

Maximum credit per child is $2500.

For son Miles

Amount paid for books is also an education expense

Total education expense for miles is = $500 + $700 =$1200

For first $2000 100% of education expense can is taken as credit

=$1200 X 100% = $1200

Therefore the total credit is =$2500 + $1200 =$3700.

All the conditions with respect to parents income range and education are satisfied.

For any further information please comment. Thanking you.