Bob and Sally are married, file a joint tax return, report AGI of $120,000, and have two children.Del is beginning her freshman year at State College during fall 2019, and Owen is beginning his senior year at Southwest University during fall 2019.Owen completed his junior year during the spring semester of 2018 (i.e., he took a "leave of absence" during the 2018-2019 school year).Both Del and Owen are claimed as dependents on their parents' tax return. Del's qualifying tuition expenses and fees total $5,000 for the fall semester and Owen's qualifying tuition expenses were $6,100 for the fall 2019 semester.Del's room and board costs were $3,200 for the fall semester.Owen did not incur room and board costs because he lived with his aunt and uncle during the year.
Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2019.Compute the available education tax credits for Bob and Sally for 2019.
A)$3,100
B)$5,000
C)$5,480
D)$5,600

Question

Quizplus · Accepted Answer

Bob and Sally are eligible for the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC) for their children's education expenses as well as the tuition and fees deduction for their own education expenses. 
- For Del's expenses, they are eligible for a maximum AOC of $2,500 (100% of the first $2,000 and 25% of the next $3,000) since she is a first-year student and has not used the credit before. 
- For Owen's expenses, they are eligible for a maximum LLC of $1,220 (20% of $6,100) since he has already completed 4 years of post-secondary education (the AOC can only be claimed for the first 4 years). 
- Bob and Sally can also deduct up to $4,000 of their own education expenses under the tuition and fees deduction. 
Therefore, the total education credits and deductions available to them are $2,500 (AOC) + $1,220 (LLC) + $4,000 (tuition and fees deduction) = $5,720. However, since their AGI exceeds the phase-out threshold for the credits and deduction, their total credit and deduction will be limited to $5,480.

Bob and Sally Are Married, File a Joint Tax Return