American Opportunity Credit Research Paper

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Shaina Marrs Acct 401- GDB Forum 3 Thread February 15, 2011 As a student pursuing further education, tax credits and tax adjustments are of great interest to me. Choosing whether to take the, “American Opportunity Credit,” or to just deduct my tuition and fees expenses is pretty complex. The decision for students is dependent on a few areas. Therefore, two students may have the same expenses but may choose a different route to take. The American Opportunity credit is an educational credit available for eligible students. This credit is available for qualified expenses incurred by a taxpayer, taxpayer’s spouse, or taxpayer’s dependent (Willis, E., Hoffman, W., Maloney, D. & Raabe, W., 2010, p. 12-22). To be considered an eligible student,…show more content…
The adjustments are eligible deductions on AGI, of the taxpayer, the taxpayer’s spouse, or a dependent. With the Tuition and Fees Deduction, the only expenses that are deductible are those that are required for enrollment at a qualified institution; generally not including books (Tyson, E., Munro, M. & Silverman, D., 2008, p. 130-131). This too qualifies both a student who relies on loans for all expense coverage, and a student who pays out of his or her own pocket. There is no limitation on the amount of income for qualification, but in order to deduct tuition and fees, you will need some sort of income. This is because the deduction amount is just that, a deduction; not…show more content…
Not owing anything, and having already low income, Mary should file for the American Opportunity Credit. Mary’s credit is calculated based on her tuition. 100 percent of the first $2000 of tuition expenses, plus 25 percent of the next $2000 of tuition expenses, calculates Mary’s education credit totaling the maximum amount of $2500. In Mary’s case, there is no need to lower an AMT liability, so Mary will be refunded 40% of this credit. Mary will end up with her income tax refund from her annual salary plus another $1000 refund from the American Opportunity Credit (.4 x $2500=

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