To determine the maximum American Opportunity Tax Credit (AOTC) that Elaine can claim for the tuition payment and books, we need to consider the income limits and phase-out range for the credit. In addition, the credit is calculated as 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000.
Here are the calculations based on the given alternative situations:
1. Elaine's AGI is $85,500:
Elaine's AGI is below the phase-out range for the AOTC. Therefore, she can claim the full credit.
Maximum AOTC = $2,280 (tuition payment) + $740 (books) = $3,020.
2. Elaine's AGI is $171,000:
Elaine's AGI is within the phase-out range for the AOTC, but not above it.
The phase-out range for married filing jointly in 2022 is $160,000 to $180,000.
To calculate the reduced AOTC, we need to determine the percentage of the phase-out range that Elaine's AGI falls into:
Percentage within phase-out range = (AGI - Lower limit) / (Upper limit - Lower limit)
Percentage within phase-out range = ($171,000 - $160,000) / ($180,000 - $160,000) = 0.55
The reduced AOTC is calculated by multiplying the percentage within the phase-out range by the maximum credit amount:
Reduced AOTC = 0.55 * ($3,020) = $1,661 (rounded to the nearest whole dollar).
3. Elaine's AGI is $212,000:
Elaine's AGI is above the phase-out range for the AOTC.
In this situation, Elaine is not eligible to claim the AOTC, and the maximum credit amount would be zero.
Therefore, the maximum AOTC that Elaine can claim for the given alternative situations are as follows:
1. Elaine's AGI is $85,500: $3,020
2. Elaine's AGI is $171,000: $1,661
3. Elaine's AGI is $212,000: $0