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.

Page 2 of Nicole's partially completed Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), is shown below. Assuming they meet all the requirements, what amount can Jake and Nicole claim for the American Opportunity Tax Credit when they file their 2020 return?

$450

$1,000

$2,450

$2,500

Question 2
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

Transcribed Image Text:Form 8863 (2020) Narne(s) shown on return JAKE AND NICOLE GRAHAM GRAHAM XXX-XX-XXx Pagc 2 Your soclal securlty number XXX-XX-XXXX Complete Part II for each student for whom you're claiming either the American opportunity credit or lifetime learning credit. Use additional copies of page 2 as needed for CAUTION each student. Student and Educational Institution Information. See instruetions. Part III 20 Studont namo (as shown on pago 1 ot your tax return) 21 Studont social socurity numbor (as shown on page 1 ot your tax rcturn) NICOLE GRAHAM ХXX-хх-хххх 22 Educational institution information (see instructions) a. Name of first ecucational institution b. Name of second educational institution (if any) STATE UNIVERSITY (1) Address. Number and street (or P.O. box). City, town or post office, state. and ZIP code. If a foreign address, see instructions. 4400 COLLEGE BOULEVARD YOUR CITY, YS XXXXX (2) Did the studont roccivo Form 1098-T (1) Address. Number and street (or P.O. box). City, town or post office. state, and ZIP code. If a foreign address, see instructions. (2) Did the student receive Form 1098-T X Ves O No Yes No from this institution for 2020? trom this institution tor 2020? (3) Did the student receive Form 1098-T (3) Did the student receive Form 1098-T Ves 図 No O Yes O No trom this institution for 2019 with box from this institution for 2019 with box 7 checked? 7 checked? (4) Enter the institution's employer identiřfication number (EIN) (4) Entor the institution's omployor idontitication numbor it you're claiming the Aimerican opportunity credit or if you (EIN) if yo're claiming the American opportunity credit or checked "Yes" in (2) or (3). You can get the EIN from Form it you chocked "Ycs" in (2) or (3). You can get the EIN 1098-T or trom the institution. Irom Form 1098-T or froin the institulion. XX-1234567 23 Has the Hope Scholarship Credit or American opportunity Yes -- Stop! credit boon claimod tor this studont tor any 4 tax ycars O Go to linc 31 tor this studont. A No -- Go to line 24. before 2020? 24 Was the student enrolled at least half-time for at least one academic period that began or is treated as having begun in 2020 X Yes -- Go to line 25. I| No -- Stop! Go to line 31 tor this studont. at an eligible edicational institution in a program leading towards a postsccondary dogrcc, certiticate, or other recognizcd posisecondary educational credenlial? See instructions. 25 Did the shudent comolete the firet 4 ugare of posteeconiar
Transcribed Image Text:Form 8863 Education Credits OMB No. 1545-0074 (American Opportunity and Lifetime Learning Credits) Attach to Form 1040 or 1040-SR. 2020 Attachment Sequence No. 50 Department of the Treasury Internal Revenue Service (99) Go to www.Irs.gov/Form8863 for Instructions and the latest Information. Your soclal security number хXX-хх-хххх Name(s) shown on return JAKE AND NICOLE GRAHAM Complete a separate Part IIl on page 2 for each student for whom you're claiming either credit before you complete Parts I and II. CAUTION Refundable American Opportunity Credit 1 After completing Part III for each student, enter the total of all amounts from all Parts III, line 30 2 Enter: $180,000 it marriod filing jointly: $90,000 if single, head of household, or qualifying widow(er) .... 3 Enter the amount from Form 1040 or 1040-SR, line 11. If you're filing Fom Part I ....... 1 180,000 2 2555 or 4563, or you're excluding income from Puerto Rico, see Pub. 970 for the amount to enter,... 00 ,ר4 3 4 Subtract line 3 from line 2. If zero or less, stop; you can't take any 133,000 education credit ... 5 Enter: $20,000 if married filing jointly; $10,000 if single, head of household, or qualitying widow(er). 6 If line 4 is: Equal to or more than line 5, enter 1.000 on line 6 • Less than line 5, divide line 4 by line 5. Enter the result as a docimal (rounded to 4 20,000 5 1.0000 at least three places) . 7 Multiply line 1 by line 6. Caution: If you were under age 24 at the end of the year and meet the conditions described in the instructions, you can't take the refundable American opportunity credit; skip line 8, enter the amount from line 7 on line 9, and check this box 7 8 Refundable American opportunity credit. Multiply line 7 by 40% (0.40). Enter the amount here and on Form 1040 or 1040-SR, line 29. Then go to line 9 below Part II 8 Nonrefundable Education Credits 9 Subtract line 8 from line 7. Enter here and on line 2 of the Credit Limit Worksheet (see instructions) 9 ...... 10 After completing Part III for each student, enter the total of all amounts from all Parts III, line 31. If zero, skip lines 11 through 17, enter -0- on line 18, and go to line 19 11 Enter the smaller of line 10 or $10,000 12 Multiply line 11 by 20% (0.20) ... 10 11 ... 12 13 Enter: $138,000 if married filing jointly; $69,000 if single, head of household, or qualitying widow(or).... 13 14 Enter the amount from Form 1040 or 1040-SR, line 11. If you're filing Form 2555 or 4563, or you're excluding income from Puerto Rico, see Pub. 970 for the amount to enter.... 14 15 Subtract line 14 from line 13. If zero or less, skip lines 16 and 17. enter -0-

Question

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.

Page 2 of Nicole's partially completed Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), is shown below. Assuming they meet all the requirements, what amount can Jake and Nicole claim for the American Opportunity Tax Credit when they file their 2020 return?

$450
$1,000
$2,450
$2,500

Question 2
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

Form 8863 (2020)
Narne(s) shown on return
JAKE AND NICOLE GRAHAM
GRAHAM
XXX-XX-XXx
Pagc 2
Your soclal securlty number
XXX-XX-XXXX
Complete Part II for each student for whom you're claiming either the American
opportunity credit or lifetime learning credit. Use additional copies of page 2 as needed for
CAUTION each student.
Student and Educational Institution Information. See instruetions.
Part III
20 Studont namo (as shown on pago 1 ot your tax return)
21 Studont social socurity numbor (as shown on page 1 ot your tax
rcturn)
NICOLE GRAHAM
ХXX-хх-хххх
22 Educational institution information (see instructions)
a. Name of first ecucational institution
b. Name of second educational institution (if any)
STATE UNIVERSITY
(1) Address. Number and street (or P.O. box). City, town or post
office, state. and ZIP code. If a foreign address, see instructions.
4400 COLLEGE BOULEVARD
YOUR CITY, YS XXXXX
(2) Did the studont roccivo Form 1098-T
(1) Address. Number and street (or P.O. box). City, town or post
office. state, and ZIP code. If a foreign address, see instructions.
(2) Did the student receive Form 1098-T
X Ves
O No
Yes
No
from this institution for 2020?
trom this institution tor 2020?
(3) Did the student receive Form 1098-T
(3) Did the student receive Form 1098-T
Ves
図 No
O Yes
O No
trom this institution for 2019 with box
from this institution for 2019 with box
7 checked?
7 checked?
(4) Enter the institution's employer identiřfication number (EIN)
(4) Entor the institution's omployor idontitication numbor
it you're claiming the Aimerican opportunity credit or if you
(EIN) if yo're claiming the American opportunity credit or
checked "Yes" in (2) or (3). You can get the EIN from Form
it you chocked "Ycs" in (2) or (3). You can get the EIN
1098-T or trom the institution.
Irom Form 1098-T or froin the institulion.
XX-1234567
23 Has the Hope Scholarship Credit or American opportunity
Yes -- Stop!
credit boon claimod tor this studont tor any 4 tax ycars
O Go to linc 31 tor this studont. A No -- Go to line 24.
before 2020?
24 Was the student enrolled at least half-time for at least one
academic period that began or is treated as having begun in 2020
X Yes -- Go to line 25.
I| No --
Stop! Go to line 31
tor this studont.
at an eligible edicational institution in a program leading towards a
postsccondary dogrcc, certiticate, or other recognizcd
posisecondary educational credenlial? See instructions.
25
Did the shudent comolete the firet 4 ugare of posteeconiar

Form 8863
Education Credits
OMB No. 1545-0074
(American Opportunity and Lifetime Learning Credits)
Attach to Form 1040 or 1040-SR.
2020
Attachment
Sequence No. 50
Department of the Treasury
Internal Revenue Service (99)
Go to www.Irs.gov/Form8863 for Instructions and the latest Information.
Your soclal security number
хXX-хх-хххх
Name(s) shown on return
JAKE AND NICOLE GRAHAM
Complete a separate Part IIl on page 2 for each student for whom you're claiming either credit
before you complete Parts I and II.
CAUTION
Refundable American Opportunity Credit
1 After completing Part III for each student, enter the total of all amounts from all Parts III, line 30
2 Enter: $180,000 it marriod filing jointly: $90,000 if single, head of
household, or qualifying widow(er) ....
3 Enter the amount from Form 1040 or 1040-SR, line 11. If you're filing Fom
Part I
.......
1
180,000
2
2555 or 4563, or you're excluding income from Puerto Rico, see Pub. 970 for
the amount to enter,...
00 ,ר4
3
4 Subtract line 3 from line 2. If zero or less, stop; you can't take any
133,000
education credit ...
5 Enter: $20,000 if married filing jointly; $10,000 if single, head of household,
or qualitying widow(er).
6 If line 4 is:
Equal to or more than line 5, enter 1.000 on line 6
• Less than line 5, divide line 4 by line 5. Enter the result as a docimal (rounded to
4
20,000
5
1.0000
at least three places) .
7 Multiply line 1 by line 6. Caution: If you were under age 24 at the end of the year and meet the conditions
described in the instructions, you can't take the refundable American opportunity
credit; skip line 8, enter the amount from line 7 on line 9, and check this box
7
8 Refundable American opportunity credit. Multiply line 7 by 40% (0.40). Enter the amount here and
on Form 1040 or 1040-SR, line 29. Then go to line 9 below
Part II
8
Nonrefundable Education Credits
9 Subtract line 8 from line 7. Enter here and on line 2 of the Credit Limit Worksheet (see instructions)
9
......
10 After completing Part III for each student, enter the total of all amounts from all Parts III, line 31. If
zero, skip lines 11 through 17, enter -0- on line 18, and go to line 19
11 Enter the smaller of line 10 or $10,000
12 Multiply line 11 by 20% (0.20) ...
10
11
...
12
13 Enter: $138,000 if married filing jointly; $69,000 if single, head of
household, or qualitying widow(or)....
13
14 Enter the amount from Form 1040 or 1040-SR, line 11. If you're filing Form
2555 or 4563, or you're excluding income from Puerto Rico, see Pub. 970 for
the amount to enter....
14
15 Subtract line 14 from line 13. If zero or less, skip lines 16 and 17. enter -0-

Accepted Answer

Note:
“Since you have posted multiple questions, we will provide the solution only to the first…

Question 1.

Question 2Assuming 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.

Question 2
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.