Question

Paolo and Isadora Shaw are married, file a joint tax return, and have one dependent child, Dante. The Shaws report modified AGI of $148,000. The couple paid $10,485 of tuition and $16,860 for room and board for Dante, a full-time first-year student at Serene College and claimed as a dependent by Paola and Isidora.

Determine the amount of the Shaws’ American Opportunity credit for the year.

Answer 1

Eligibility:

Person

1). If a dependent child with a single parent then AGI should be less then 90000/-

If a dependent child with joint taxpayer parents then AGI should be less then 180000/-

He Joint parents with 148000/-

So He is eligible for American Opportunity Credit.

Expenses:

To get the tax benefits expenses should be related to pursuing the courses

Here two expenses

Tuition Fees; 10485/-

Rooms & accommodation: 16860/-

Tuition fees only eligible for the tax credit because it's directly related to pursuing.

Calculation of Deduction:

As per American Opportunity Credit for 1st 2000 of the eligible amount 100% 2nd 2000 of the eligible amount 25%.

Here they paid 10485/- but we only take 4000/- of it, for first 2000*100%=2000 & 2nd 2000*25%=500/-

Totaly its comes

2500/-

(American Opportunity Credit)