Jake (27) and Nicole (26) Graham are married and filing a joint return. Jake was employed full-time during the year. Nicole worked part-time, and she was also a full-time student at State University. During the year, she paid $3,800 in tuition and fees, substantiated with Form 1098-T. She did not receive any scholarships during the year. Nicole meets
Review the following scenario. Use the information provided to answer questions about the taxpayers’ 2020 return.
Jake (27) and Nicole (26) Graham are married and filing a joint return. Jake was employed full-time during the year. Nicole worked part-time, and she was also a full-time student at State University. During the year, she paid $3,800 in tuition and fees, substantiated with Form 1098-T. She did not receive any scholarships during the year. Nicole meets all the requirements to qualify for the American Opportunity Tax Credit.
The couple’s adjusted gross income is $47,000. Their tax on line 16 and on line 18 of their Form 1040 is $2,272. They had no additional taxes.
To assist you in answering questions about the couple’s tax benefits for education, you may refer to the partially completed Credit Limit Worksheet, which is shown below.
2020 Form 8863 Credit Limit Worksheet – Line 19
1. Enter the amount from Form 8863, line 18. _________
2. Enter the amount from Form 8863, line 9. _________
3. Add lines 1 and 2. ________
4. Enter the amount from Form 1040 or 1040-SR, line 18. $2,272
5. Enter the total of your credits from Schedule 3 (Form 1040), lines 1 and 2, and the amount from Schedule R, line 22. $0
6. Subtract line 5 from line 4. $2,272
7. Enter the smaller of line 3 or line 6 here and on Form 8863, line 19. ________
Question 1
Assuming all other requirements are met, what is the couple's refundable portion of the American Opportunity Tax Credit? To assist you in answering this question, Page 1 of Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), is provided below.
- $228
- $980
- $1,000
- $2,450
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