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Marcus (20) attends State University and is a qualifying student for the purpose of the American Opportunity Tax Credit (AOTC). His parents will claim him as a dependent on their jointly-filed 2020 return. Their adjusted gross income is $125,000, and they paid $14,000 for Marcus' tuition during the year. What is the maximum AOTC Marcus' parents may be eligible to receive

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The maximum AOTC that can be claimed by Andre’s parents is $2,500.

American Opportunity Tax Credit means a tax credit on education expenses which are incurred within first four years of a student’s higher education.

  • The full tax credit is allowed when modified adjusted gross income is $160,000 or less.

  • 100% of first $2000 spent on education expenses and 25% of next $2000 of qualifying education expenses.

Maximum AOTC = $ 2000 + (0.25 × $2000)

Maximum AOTC = $2000 + $ 500

Maximum AOTC = $2500

Therefore, the maximum AOTC that can be claimed by Andre’s parents is $2,500.

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