Question

In 2019, Elaine paid $2,800 of tuition and $600 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 tax credit that Elaine can claim for the tuition payment and books in each of the following alternative situations?

a. Elaine’s AGI is $80,000.

b. Elaine’s AGI is $168,000.

c. Elaine’s AGI is $184,000.

Answer 1

ANSWER

a. Elaine's AG is $80,000. Elaine may claim an American opportunity credit (AOC) of $2,350. Description Amount Explanation (1) AOC before phase-out $2,350 2,000 * 100% +(3,400 – 2,000) * 25% (2) AGI $80,000 (3) Phase-out threshold 160,000 (4) Excess AGI $0 (2)-(3) but not <0 and limited to a maximum of $20,000} (5) Phase-out range for taxpayer filing as married filing jointly $20,000 $180,000 - $160,000 (6) Phase-out percentage 0% (4)/(5) or 100% max (7) Phase-out amount $0 (1)*(6) AOC after-phase-out $2,350 (1)-(7)

b. Elaine's AGI is $168,000. Elaine may claim an AOC of $1,410. Description Amount Explanation (1) AOC before phase-out $2,350 2,000 100% +(3,400 -2,000) 25% (2) AGI $168,000 (3) Phase-out threshold 160,000 (4) Excess AGI $8,000 (2)-(3) (5) Phase-out range for taxpayer filing as married filing jointly $20,000 $180,000 - $160,000 (6) Phase-out percentage 40% (4)/(5) or 100% max (7) Phase-out amount $940 (1)*(6) AOC after-phase-out $1,410 (1)-(7)

C. Elaine's AGI is $184,000. Because Elaine's AGI exceeds the threshold amount, she may not claim an AOC. Description Amount Explanation (1) AOC before phase-out $2,350 2,000 100% +(3,400 – 2,000) 25% (2) AGI $184,000 (3) Phase-out threshold 160,000 (4) Excess AGI $24,000 (2)-(3) (limited to $20,000) (5) Phase-out range for taxpayer filing as married filing jointly $20,000 $180,000 – $160,000 (6) Phase-out percentage 100% (4)/(5) (7) Phase-out amount $2,350 (1)*(6) AOC after-phase-out $0 (1)-(7)

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