Carey and Corrine are married and have two children in college. Jason is a sophomore, and Justine is a senior. They pay $2,000 in tuition and fees for Jason, $600 for his books and $3,000 for his room and board. Justine's tuition and fees are $3,000, her book expense is $800, and her room and board expenses are $2,600. Their adjusted gross income is $165,000. What amount can they claim as a tax credit for the higher education expenses she pays?

Question

Quizplus · Accepted Answer

Carey and Corinne are allowed to claim the American Opportunity Credit for both Jason and Justine. For Jason, they can claim 100% of the first $2,000 of eligible expenses and 25% of the next $2,000, which means they can claim $2,000 + ($600 + $3,000) * 0.25 = $1,375 for him. For Justine, they can claim 100% of the first $2,000 and 25% of the next $2,000, which means they can claim $2,000 + ($800 + $2,600) * 0.25 = $1,350 for her. Therefore, the total tax credit they can claim is $1,375 + $1,350 = $2,725. However, the maximum credit they can claim is $2,500. Therefore, they can claim a tax credit of $2,500. Since their AGI is above the phase-out limit, they are not eligible for the Lifetime Learning Credit.

Carey and Corrine Are Married and Have Two Children in College