Timothy and Alice, who are married with modified AGI of $90,000, are sending their daughter to her first year of college. Their total tuition and related payments during the year amounted to $13,000. In addition, their daughter received a $10,000 scholarship to cover tuition. They have not taken advantage of any other type of tax benefit related to educational expenses. Their American Opportunity Tax Credit is

Question

Quizplus · Accepted Answer

The American Opportunity Tax Credit allows for 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000. After the $10,000 scholarship, $3,000 of expenses remain. Thus, they get $2,000 (100% of the first $2,000) + $250 (25% of the remaining $1,000) = $2,250.

Timothy and Alice, Who Are Married with Modified AGI of $90,000