Question

In 2018, Laureen is currently single. She paid $2,560 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen ($2,560 each for a total of $5,120). Sheri and Meri qualify as Laureen’s dependents. Laureen also paid $1,830 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University. Finally, Laureen paid $1,330 for herself to attend seminars at a community college to help her improve her job skills.

What is the maximum amount of education credits Laureen can claim for these expenditures in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.)

a. Laureen's AGI is $45,000.

     

American opportunity credit=. ????

Lifetime learning credit= ?????

Answer 1

As per American Opportunity tax credit the eligibility to avail the credit facility has to be fulfilled the following criteria:

• When AGI is $80000 or less than it the maximum credit i.e.$2500 can be allowed per student together with a refund of 40% of credit(maximum $1000)
• The nature of education should be post secondary education it also means under graduate courses can also be included. However, the credit can availed for the first four years
• Type of degree includes to achieve degree or certificate but does not include such courses which is designed to improve job skills.

Therefore, considering the above the maximum amount of education credit under

American opportunity credit is

In the University level the first year students are called freshmen

Therefore, under AOTC the twin sisters can avail credit in the following manner

100% on first $20000 each + 25% on next $2000 = maximum $2500

Total tuition fees paid for each student is $2560

Therefore, credit limit for each twin sister is $2000 + 25% on(2560-2000)

= $2000 +$140

=$2140 per twin

(As AGI $45,000 is lower than $80,000)

In case of Ryan, the tuition fees paid relating to attending the junior year at the University is also subject to achieve the credit that is $1830...........since it is 100%

However, Tuition fees paid for improving job skill does not come under credit facility of Summary under AOTC

Available of credit 100% of first $2000 + 25% of next $2000

Therefore, under AOTC total credits are $2140 +$2140+$1830 = $6110

Refund is available $856(40% on $2140) each for twin sisters and 40% of $1830 i.e. $732

Total refund $2444

Under the structure of Lifetime learning credit

The eligibility criteria:

Here the credit formula is 20% on first $10000 of expenses for a tax payer i.e maximum of $2000 credit can be availed

Secondly, Income phase range is between $57,000 to $67,000

Thirdly, No refund can be availed

Fourthly, Post secondary education together with improvement skill program

Total credit under life time learning credit

In the given problem the total tuition fees expenses are $5120 +$1830+$1330 =$8280

20% on $8280 = $1656