Kyle and Alyssa paid $1,000 and $2,800 in qualifying expenses for their two daughters Jane and Jill,respectively,to attend the University of California.Jane is a sophomore and Jill is a freshman.Kyle and Alyssa's AGI is $135,000 and they file a joint return.What is their allowable American opportunity tax credit after the credit phase-out based on AGI is taken into account?
A)$0.
B)$2,000.
C)$3,800.
D)$3,500.

Question

Quizplus · Accepted Answer

The American opportunity tax credit allows for a maximum credit of $2,500 per eligible student. However, the credit is subject to phase-out based on the taxpayer's AGI. For married taxpayers filing jointly, the phase-out begins at an AGI of $160,000, and the credit is fully phased-out at an AGI of $180,000. Kyle and Alyssa's AGI of $135,000 is below the phase-out range, so they can claim the full credit. They paid $1,000 for Jane, a sophomore, and $2,800 for Jill, a freshman, for a total of $3,800 in qualifying expenses. Therefore, their allowable American opportunity tax credit is $3,800.

Kyle and Alyssa Paid $1,000 and $2,800 in Qualifying Expenses