Martina is single and has two children in college Matthew is

Martina is single and has two children in college. Matthew is a sophomore and Christine is in her fifth year of college. Martina pays $3,600 in tuition and fees for Matthew, $700 for textbooks and $2,000 for his room and board. Christine\'s tuition and fees are $4,800, her textbooks are $550, and her room and board expenses are $1,800. Martina\'s adjusted gross income is $57,000. a. Martina can claim $ Xas a tax credit for the higher education expenses

Solution

Martina can claim an American Opportunity Tax Credit (AOTC) for Matthew and the Lifetime Learning Tax

Credit(LLTC) for Christine.

Only the expenses incurred for tuition and fees and textbooks are eligible for the AOTC.

Because Matthew’s qualifying expenses of $4,300 ($3,600 + $700) exceed $4,000,

Martina can claim the maximum AOTC:-

= ($2,000 x100%) + ($2,000x25%)

= $2000 + $500

= $2500

Christine is not eligible for the AOTC because she is in her fifth year of study.

Only tuition and fees are qualifying expenses in calculating the LLTC.

Martina can claima LLTC :-

= $4,800x20%

= $960

Because Martina’s adjusted gross income exceeds $51,000,

her LLTC must be reduced using the following formula:

Tax credit percentage :-

= Adjusted gross income- $51,000 / $10,000

= $57000 - $51000 / $10000

= 60%

Tax credit allowed :-

= Calculated tax credit x (1 - tax credit percentage)

= $960 (1 - 60%)

= $384