Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2018, and Arethia is beginning her senior year at Northeast University during Fall 2018 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return. Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2018. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2018 is:

Question

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The American Opportunity credit is available for each eligible student for up to four years of undergraduate study. It provides a credit of up to $2,500 per eligible student, based on 100% of the first $2,000 of qualifying tuition expenses and 25% of the next $2,000 of qualifying expenses.

In this case, Jermaine and Kesha have two eligible students: Devona and Arethia. Devona's qualifying expenses are $4,000, so she can receive the full credit of $2,500. Arethia's qualifying expenses are $6,200 for each semester, or $12,400 for the year. Since the credit is limited to $2,500 per student, Arethia can only receive a maximum credit of $2,500.

Therefore, the total American Opportunity credit available to Jermaine and Kesha for 2018 is $2,500 for Devona plus $2,500 for Arethia, for a total of $5,000.

Jermaine and Kesha Are Married, File a Joint Tax Return