Jeffery and Cassie,who are married with modified AGI of $90,000,are sending their son to his first year of college.Their total tuition and related payments during 2019 amounted to $5,500.They have not taken advantage of any other type of tax benefit related to educational expenses.Their American Opportunity Tax Credit for 2019 is
A)$1,500.
B)$2,000.
C)$2,500.
D)$5,000.

Question

Quizplus · Accepted Answer

The American Opportunity Tax Credit is a credit for the first four years of higher education expenses. Jeffery and Cassie's total tuition and related payments meet the requirement for the maximum credit of $2,500. However, the credit phases out for modified AGIs between $80,000 and $90,000 for married couples filing jointly. Since their modified AGI is $90,000, the credit will be reduced by 25% of the amount by which their AGI exceeds $80,000 ($90,000 - $80,000 = $10,000) which is $2,500 ($10,000 x 0.25 = $2,500). Therefore, their American Opportunity Tax Credit for 2019 is $2,500 - $0 = $2,500.

Jeffery and Cassie,who Are Married with Modified AGI of $90,000,are