The american opportunity tax credit formerly the hope

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Mathematical Excursions
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Chapter 9 / Exercise 5
Mathematical Excursions
Aufmann
Expert Verified
The American Opportunity Tax Credit (formerly the HOPE Credit) provides a maximum nonrefundable tax credit of $2,500 per student for each of the first four years of post-secondary education. The $2,500 per year limitation is made up of 100 percent of the first $2,000 of qualified expenses plus 25 percent of next $2,000 of qualified expenses. The American Opportunity Tax Credit applies for the first four years of higher education. The credit is applicable to the taxpayer, spouse, and dependents. The student must be enrolled at least half time to qualify for the American Opportunity Tax credit. Qualified expenses include tuition, fees, and course materials. The American Opportunity Tax credit phases out for AGI between $80,000 and $90,000 for singles; and $160,000 and $180,000 on a joint return. Except for dependent taxpayers subject to the kiddie tax, 40% of the credit is refundable. The Lifetime Learning Credit provides a maximum credit of $2,000 for 20 percent of qualified tuition expenses paid by the taxpayer for any year the American Opportunity Tax Credit is not claimed. The Lifetime Learning credit is 20 percent of the first $10,000 of qualified tuition, fees, and course materials paid for taxpayer, spouse, and/or dependent. It is figured on a per-taxpayer basis. The credit applies for any number of years of higher education. The Lifetime Learning credit phases out for single taxpayers with income exceeding $53,000 and marrieds with income exceeding $107,000. EXAMPLE 9.3 Joe and Sheila Ames have three children in college. Joni, a freshman, incurs $2,400 in tuition expenses during 2013. Mike, a junior, incurs $3,000 in tuition expenses. Sally, in graduate school, incurs $8,500 in tuition expenses. Joe and Sheila paid all of the tuition expenses, and their adjusted gross income does not exceed the limits. They will be allowed a credit on their 2013 tax return of $6,050. The American Opportunity Tax Credit applies to Joni and Mike and is limited to 100 percent of the first $2,000 of expenses and 25 percent of the next $2,000. The Lifetime Learning Credit applies to Sally and is limited to 20 percent of the first $10,000 of expenses. ¶9032 CHILD TAX CREDIT Taxpayers are allowed a credit for qualifying children under age 17. The credit is $1,000 per child for tax years 2003–2013. The credit phases out when modified adjusted gross income exceeds $75,000 for single taxpayers, $110,000 for married taxpayers filing a joint return, and $55,000 for married taxpayers filing separately. The credit is reduced by $50 for each $1,000, or fraction thereof, of modified adjusted gross income above the threshold levels. Modified adjusted gross income is determined without regard to the exclusions from gross income for foreign earned income and foreign housing costs and income of residents of Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico. The child tax credit generally uses the same relationships to define an eligible child as are used in the uniform definition of a child for purposes of the dependency exemption. This means that a qualifying child for purposes of the child credit includes the taxpayer’s children and their
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Mathematical Excursions
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Chapter 9 / Exercise 5
Mathematical Excursions
Aufmann
Expert Verified

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