H and W are married and have twins that are attending State University as freshmen this year.State University is on the semester system and charges $1,000 tuition per semester.H and W pay State University $2,000 this year.H and W have adjusted gross income of $170,000.The allowable American Opportunity Tax Credit for H and W is
A)$2,000
B)$400
C)$600
D)$1,000
E)$0

Question

Quizplus · Accepted Answer

The American Opportunity Tax Credit allows for a credit of up to $2,500 per year per eligible student for qualifying expenses such as tuition, fees and course materials. The credit can be claimed for up to four years per student. In this case, H and W paid $2,000 in tuition for their two eligible children, so they can claim up to $2,000 in tax credits (since $2,000 is the maximum amount of eligible expenses). The allowable credit for H and W is $1,000 ($2,500 credit x 40% of $2,000 eligible expenses). Therefore, the best choice is D.

H and W Are Married and Have Twins That Are