Kyle and Alyssa paid $1,000 and $2,000 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?

Question

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The American Opportunity Tax Credit (AOTC) allows up to $2,500 per eligible student. For Jane, they can claim $1,000, and for Jill, they can claim $2,000, totaling $3,000. Their AGI is below the phase-out threshold for joint filers, so no reduction is needed.

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