 So you probably, in other words, don't need to say, well, I know exactly what your credit will be by calculating if your income was 85,000 in a discussion. You're going to rely on the software to some degree to help you out with that calculation so that you have the general ideas and then you can deconstruct so that you can project into the future, discuss what is going on logically from the broad strokes. And then when doing tax preparation, of course, you will have the form and you can enter that into the system and deconstruct to make sure everything's properly calculated. All right. You can't claim an American opportunity credit if your MAGI Modified Adjusted Gross Income is 90,000 or more, 180,000 or more if file a joint return. Modified Adjusted Gross Income, the MAGI. For most taxpayers, the MAGI is Adjusted Gross Income, just the AGI or AGI Adjusted Gross Income as figured on your federal income tax return. So MAGI, when using form 1040 or 1040 SR, if you file form 1040 or 1040 SR, your MAGI is the AGI Online 11 of that form modified by adding back any. So these are the modification portion of the MAGI, Modified AGI. One, Foreign Earned Income Exclusion. So that's going to be the big one, but it would only be there if you had that Foreign Earned Income Exclusion. Two, Foreign Housing Exclusion. Three, Foreign Housing Deduction. Four, Exclusion of Income by Bonafide Residents of America, Samoa. And five, Exclusion of Income by Bonafide Residents of Puerto Rico. All right. Here's the worksheet for the MAGI. If you have these components that are in place, I won't go into it in detail here. This is another area where it doesn't hit everyone with these MAGI because oftentimes if these aren't in effect, it'll just be your AGI. And of course, software can help you out in those scenarios as well. And you can kind of deconstruct using software. So phase out. If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2 through 7 of form 8863 part 1. The same method is shown in the following example. You are filing a joint return and your MAGI is $165,000 in 2022. You paid $5,000 of qualified education expenses. You figure a tentative American opportunity credit of $2,500 because you paid more than the $4,000 and therefore you maxed out at $2,500 if you didn't have an AGI phase out for your income level, which we're assuming we will have here. So 100% of the first $2,000 qualified expenses plus 25% of the next $2,000. OK, because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit $2,500 by a fraction. The numerator top part of the fraction is $180,000. The upper limit for those filing a joint return minus your MAGI. But the denominator bottom part is $20,000, the range of income for the phase out $160,000 to $180,000. The result is the amount of your phased out reduced American opportunity credit $1,875, in this case. So you're probably not going to do that like in your head, you know, and be able to because you're going to just look at the range of when the phase out starts and ends. And then the software will probably help you out with this calculation in most cases, although it's not that complex to calculate, but I'm just saying $2,500, $180,000 minus to $165,000 over the $20,000 gives us that $1875,000. All right, refundable part of credit. 40% of the American opportunity credit is refundable for most taxpayers, meaning the refundable portion of the credit is the amount that could take the tax liability below zero. If you don't owe any tax, you still get like a quote refund in quote or a benefit program. That's when the tax goes used as more of a welfare program, benefit program as opposed to tax system. However, if you were under age 24 at the end of 2022 and the conditions listed below, and the conditions listed below apply to you, you can't claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, your allowed credit figured on form 8863 part two will be used to reduce your tax as a non refundable credit only. Okay, so you don't qualify for a refund if item one AB or C two and three below apply to you. One, you were a under age 18 at the end of 2022 or B age 18 at the end of 2022 and your earned income defined below was less than half of your support defined below or C over 18 and under 24 at the end of 2022 and a full time student defined below and your earned income defined below was less than one half of your support defined below. Meaning in essence, you're kind of you could be subject to being a dependent in those cases, it's possible to be a dependent. You might qualify for a dependent status in those cases. Okay, two, at least one of your parents was alive at the end of 2022. Three, you are filing a return as single head of household qualified surviving spouse or married filing separately for 2022 earned income earned income includes wages salaries professional fees and other payments received for personal services actually performed earned income includes the part of any scholarship or fellowship grant that represents payments for teaching research or other services performed by the student that are required as a condition for receiving the scholarship or fellowship grant earned income doesn't include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered if you are a sole proprietor or a partner in a trader business in which both personal services and capital or material income producing factors earned income also includes a reasonable allowance for compensation for personal services but not more than 30% of your share of net profits from that trader business after subtracting the deduction for one half of self-employment tax. However, if capital isn't an income producing factor and your personal services produced the business income the 30% limit doesn't apply. Alright support your support includes food shelter clothing medical and dental care education and the like generally the amount of the items of support will be the amount of expenses incurred by one furnishing such item so if the item of support is in the form of property or lodging measure the amount of such item of support by its fair market value however a scholarship received by you isn't considered support if you are a full-time student you can see publication 501 so you're looking at the support to see if you would qualify for in essence the support test to be claimed as a as a dependent by someone else if you were eligible to be claimed as a depend full-time student you are a full-time student for 2022 if during any part now notice we're talking about full-time student here not because it's a requirement to claim the credit but because full-time student may be one of the requirements to see if you would be possibly able to be claimed as a dependent by someone so that would be like if you're under if you're if you're still under 24 but a full-time student possibly you could still be claimed as a dependent if all the other dependency tests would be met so you are a full-time student for 2022 if during any part of any five calendar month during the year you were enrolled as a full-time student at an eligible educational institution defined earlier or took a full-time on-farm training course given by such an institution or by a state county or local government agency