Becky, a college freshman, works part-time and pays $1,650 of her college tuition expenses

Accounting Feb 16, 2021

Becky, a college freshman, works part-time and pays $1,650 of her college tuition expenses. Although Becky files her own tax return, her parents claim her as a dependent on their tax return. Becky's parents file jointly and have AGI of $50,000. What is the amount of American Opportunity tax credit her parents can claim on their tax return for the tuition Becky paid?

a. $0
b. $495
c. $1,600
d. $1,650
e. Some other amount

Expert Solution

Parents can claim 100% of tuition fees for first $ 2,000 and 25% for next $ 2,000 under American opportunity tax credit and AGI limitation is not applicable to them. So, amount of American Opportunity tax credit her parents can claim on their tax return for the tuition Becky paid is $1,650.

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