Question

Bob and Serena are married and file a joint income tax return. For 2018, their modified AGI is $70,000. Their daughter, Dawn, is in her third year at State University. They paid $4,300 for Dawn's tuition. What is the American Opportunity Credit (AOC) that Bob and Serena can claim?

Answer 1

Answer:

The American Opportunity Tax Credit (AOTC) that can be claimed is $2,500.

Explanation:

As of 2018, no changes have been made to the AOTC. By law, with a modified  adjusted gross income (MAGI) of $80,000 or less for single individuals and $160,000 or less for married filing jointly, the individuals can claim the full credit amount. It is a credit paid for an eligible student to cover education expenses, if in the first four years of postsecondary education. A maximum annual amount of $2,500 is given and an additional 40% of remaining amount (up to $1,000) if the tax owed falls to zero.