Question

In 2019, Elaine paid $2,960 of tuition and $1,040 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? (Leave no answer blank. Enter zero if applicable.) rev: 02_29_2020_QC_CS-202942 a. Elaine’s AGI is $103,250.

Answer 1

$2,500

Step-by-step explanation:

Elaine can deduct the first $2,000 and then [($4,000 - $2,000) x 25%] = $2,500 (maximum available deduction). Since Elaine files her taxes with her husband and their combined AGI is less than $160,000, then she can claim the full annual credit. The AOTC starts to phase out when the combined AGI is higher than $160,000 and phases out completed when it reaches $180,000.