Question

Alan (27) and Kara (26) are married and filing a joint return. Both Alan and Kara were full-time students all year at State College, located at 11100 College Boulevard, Your City, Your State. During the year, Alan paid $5,000 in tuition and fees, substantiated with Form 1098-T. Kara paid $3,900 in tuition and fees, also substantiated with Form 1098-I. Both Alan and Kara have part-time jobs outside of school. They did not receive any scholarships during the year. Their adjusted gross income is $45,000. Their total tax on line 11 of their federal Form 1040 is $2,142. They had no additional taxes. Both Alan and Kara meet all the requirements to qualify for the American Opportunity Tax Credit.

1) Assuming all other requirements are met, what is the amount of Alan and Kara's nonrefundable American Opportunity Credit?

a) $2,142

b) $2,475

c) $2,500

d) $2,985

2) Assuming all other requirements are met, what is the amount of Alan and Kara's refundable American Opportunity Credit?

a) $1,000

b) $1,990

c) $2,142

d) $2,985

Answer 1

Answer cb) 2475 100% de cluction for first 2000 25.7. deduction .upto max 250 0 then A OLC AOLL = 2000 + (5000-2000) x0.25 = 2750 = 2000 + (3000 - 2000) Xo.25= 2475 kara Answer ca 1000 20% deduction up to 2000 AOLC Allan = 5000 x 0.2 = 1000 AOLC kara - 3900 x0-2 = 780