Question

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2018, and Arethia is beginning her senior year at Northeast University during Fall 2018 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return.

Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2018. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2018 is:
a. $5,000.
b. $6,000.
c. $3,000.
d. $2,500.

Answer 1

A) $5,000

Step-by-step explanation:

Jermaine and Kesha can claim an American Opportunity (AO) credit for both of their daughters, Devona and Arethia.

Devona's AO credit is $2,500 (100% of the initial $2,000 qualifying expenses and 25% of the next $2,000 qualifying expenses).

Arethia's AO credit is the same as Devona's, $2,500.

The total American Opportunity credit claimed is $5,000 ($2,500 + $2,500)