ucation Tax Credit and Form 8863 Objs 2 and 5 In 2016 Jean L

ucation Tax Credit and Form 8863. (Objs. 2 and 5) In 2016, Jean Loptein (SSN 169-34- a ful-paid $3,300 for her son\'s fall tuition. Her son, Robert Loptein (SSN 399-40-1120), is GAm tudent and a freshman at the University of Georgia (212 Carlton Street, Athens, a full-time 30602). Jean files as head of household. mpute Jean\'s education tax credit if her AGI is $32,800. How much of her credit is refundable versus nonrefundable? b. Same as in Part a., except that Jean\'s AGI is $84,700. Prepare Form 8863 for Jean in Part b. Robert did not receive a Form 1098-T from the University of Georgia, nor has he been convicted of a felony. c.

Solution

Education tax credits:

For 2016, there are 2 tax credits available. One is AOTC (american opputunity tax credit, which is available for eligible expenses in the 1st 4 years of post secondary education) and 2nd is \"Life time learning\" for higher education.

Both AOTC & LLC is not available for the same student.

Maximum AOTC credit is $2500 per student (100% of 1st $2500 of tuition fees & 25% of next $2000, for a maximum of 2 children. Further, it is allowed only if the AGI is upto $80000 for single & head of the family ($160000 if married and filing jointly). Credit is partially allowed if AGI exceeds 80000 but not exceeding 90000. If exceeds 90000, then no credit is allowed.

Let us analyse in this instant case:

AGI is $32800 (within limit)

Tuition fees paid : $3300

eleigible credit = (100% * 2000) + (25% * 1300) = 2000+325=$2325

40% of eligible credit is refundable (which is $930) and balance $1395 is non refundable.

(b) If AGI is $84700:

exess AGI = $4700. This is 47% of the phaseout range (4700/10000=47%, where $10000 is excess throshold range (90000-80000). Hence, 47% of the tentative credit is phased out, which is 40% of $2325 =$1092. Hence, credit allowed is only $1233 (2325-1092)

(c) seprate columns are available for claiming education tax credits as above, in form 8863. This is self explanatory and can be filled based on the above analysis.