Bob and Sally are married, file a joint tax return, report AGI of $116,000, and have two children. Del is beginning her freshman year at State College during Fall 2017, and Owen is beginning his senior year at Southwest University during Fall 2017. Owen completed his junior year during the Spring semester of 2016 (i.e., he took a "leave of absence" during the 2016-2017 school year). Both Del and Owen are claimed as dependents on their parents' tax return.
Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2017 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year.

Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2017. Compute the available education tax credits for Bob and Sally for 2017.

Question

Bob and Sally are married, file a joint tax return, report AGI of $116,000, and have two children. Del is beginning her freshman year at State College during Fall 2017, and Owen is beginning his senior year at Southwest University during Fall 2017. Owen completed his junior year during the Spring semester of 2016 (i.e., he took a "leave of absence" during the 2016-2017 school year). Both Del and Owen are claimed as dependents on their parents' tax return. ​
Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2017 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year.
​
Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2017. Compute the available education tax credits for Bob and Sally for 2017.

Quizplus · Accepted Answer

First, we need to determine the eligible education tax credits. Bob and Sally are only eligible for the American Opportunity Credit (AOC) because their AGI does not exceed the phase-out limit.

For Del, her qualified education expenses total $5,000, and she is eligible for a maximum AOC of $2,500. We assume that her parents pay for her expenses since she is claimed as a dependent on their tax return. Therefore, her parents can claim the full $2,500 credit.

For Owen, his qualified education expenses total $6,100, and he is also eligible for a maximum AOC of $2,500. Since he did not incur any room and board costs, his parents can claim the full $2,500 credit for his expenses.

For Bob's professional education seminars, he is eligible for the Lifetime Learning Credit (LLC), which can be up to 20% of his expenses, capped at $10,000. Since Bob's expenses are only $3,000, his maximum LLC is $600.

Therefore, the total education tax credits that Bob and Sally can claim are $2,500 + $2,500 + $600 = $5,600. The correct answer is choice letter D.

Bob and Sally Are Married, File a Joint Tax Return