Bradley has two college-age children, Clint, a freshman at State University, and

Question

Bradley has two college-age children, Clint, a freshman at State University, and Abigail, a junior at Northwest University. Both Clint and Abigail are full-time students. Clint’s expenses during the 2013 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board. Abigail’s expenses for the 2013 calendar year are as follows: $10,200 tuition, $1,200 books and course materials, and $3,600 room and board. Tuition and the applicable room and board costs are paid at the beginning of each semester. Bradley is married, files a joint tax return, claims both children as dependents, and has a combined AGI with his wife of $114,000 for 2013. Determine Bradley’s available education tax credit for 2013.

Explanation / Answer

In 2013, both Clint and Abigail qualify for the American Opportunity credit. Clint’s qualifying expenses are $2,650 ($2,400 tuition and $250 books and course materials);

Abigail’s qualifying expenses are $11,400 ($10,200 tuition and $1,200 books and course materials).

Clint’s American Opportunity credit is $2,162.50 [100% of the first $2,000 of qualifying expensesplus 25% of the next $2,000 of qualifying expenses; $2,000 + ($650 ´ 25%)].

Abigail’s AmericanOpportunity credit is $2,500 (100% of the first $2,000 of qualifying expenses plus 25% of the next$2,000 of qualifying expenses; $2,000 + ($2,000 ´ 25%)].

Although the American Opportunity credits are subject to a phaseout for higher income taxpayers,Bradley’s AGI of $114,000 is less than the phase-out starting point in 2013 ($160,000 for married tax payers filing jointly).So, the total education credit available for the year is $4,662.50 ($2,162.50 + $2,500)

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