Mr. and Mrs. Bighead have two dependent children, both attending Temple Universi

Question

Mr. and Mrs. Bighead have two dependent children, both attending Temple University. Buford, age 19 is a sophomore who received a 1098T from Temple for 2017 showing $15,000 of qualified tuition and fees. Brunhilda, age 23 attends Temple Law School and she received a 1098T from Temple showing $25,000 in qualified tuition and fees.

a)Assuming an AGI on their joint return for 2017 of $172,000, how much education tax credits do the Bigheads get to take on their tax return?

b) How would your answer in a) change if their AGI were $125,000?

Explanation / Answer

Educaion tax credit is available $ 2,500 annually per dependent child for tution and fees in a recognised university. For claiming this deduction form 1098T is taken from recognised university to check the total amount paid for tution fees.

In the given case Mr. and Mrs. Bighead have $172000 income for 2017.Since they have two dependent children Buford (Age-19) and Brunhilda (Age-23) studying in Temple University so Mr. and Mrs. Bighead will get an education tax credit of $2500 annually per child.

Total AGI- $172000

Education Tax Credit :-

Buford Form 1098T showing $15000 but maximum education tax credit = $2500

Bruhilda form 1098T showing $25000 but maximum education tax credit = $2500

TOTAL EDUCATION TAX CREDIT = $ 5000

(B) In the second case also when their AGI were $125000,they will get a maximum education tax credit of $5000.The balance of education tax credit remains after tax amount reduces to zero shall be refunded to the assessee.

The maximun refund amount of education tax credit is 40% of the balance of education tax credit remains after deducting it from the total amount of tax subject to maximum of $1000.

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