In 2017, Elaine paid $2,720 of tuition and $540 for books for her dependent son

Question

In 2017, Elaine paid $2,720 of tuition and $540 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 credit that Elaine can claim for the tuition payment and books in each of the following alternative situations? (Round your intermediate calculations to two decimal places and final answer to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.) a. Elaine’s AGI is $98,750. b. Elaine’s AGI is $162,500. c. Elaine’s AGI is $194,000.

Explanation / Answer

Total Eligible expense for American Opportunity Credit 2720+540 = 3260 Eligible Credit 2000x100% = 2000 1260x25% = 315 2315 or 2500 which ever is lower CASE 1 If Elaine's AGI is $98750 In case of married filing return jointly if AGI is less then $160000 full credit will be allowed So $2315 will be allowed CASE 2 If Elaine's AGI is $162500 As AGI is more then $160000 but less then $180000 so reduced credit will be allowed Calculation of reduced Credit 180000-162500 = 17500 17500/20000x100 = 87.5% So Credit allowed will be $2315 - $2315x87.5% = 289.375 CASE 3 If Elaine's AGI is $194000 In case of married filing return jointly if AGI is more then $180000 no credit will be allowed

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