Question

Val, a single taxpayer, earned $73,000 from a full-time job as an artist's assistant. During the year she began studying on a half-time basis for a B.A. (Bachelor of Arts) degree in Fine Arts at the University of Houston. Qualified tuition, fees and course materials were $6,000. Which of the following statements regarding Valerie's tax situation is true?

		Val is eligible for either a lifetime learning credit of $1,200 or an American opportunity credit of $2,500.
		Val is eligible for an American opportunity credit of $2,500.
		Vale is not eligible for any education credits.
		Val is eligible for a lifetime learning credit of $1,200.

Answer 1

Answer :

The correct answer is " Vale is eligible for American iopportunity credit of $ 2,500"

Note : As all the conditions for availing American opportunity credit is bing satisfied by Val , she can take benefit of it.

The conditions for availing benefit of American Opportunity credit are as follows :

1	Must be enrolled for at least half-time in college
2	Must be in a degree program or be eligible to receive a certificate or similar educational credential at the completion of your studies.
3	Total Qualifying education expenses > $ 4000
4	Modified Gross Adjusted Income < $ 90,000 for single filers (<$1,80,000 for joint filers)
5	Maximum Credit available :
	a). 100% credit amount on up to $2,000 in annual expenses
	b). Additional 25% credit for the next $2,000

Note 2. As she was not satisfying the condition for taking benefit of lifetime learning credit she can not enjoy its benefit.

The conditions of Lifetime learning credit are as stated :

1	Available irrespective of the fact whether you are an undergraduate, graduate student, or older nontraditional student taking classes for job training or other purposes.
2	Total availability of credit is 20% of the first $10,000 you spend on qualified educational expenses for a given year.
3	Modified Gross Adjusted Income < $ 65,000 for single filers (<$1,31,000 for joint filers)

As the Modified gross aadjusted Income of Val = $ 73,000 which is > $ 63,000 she can not take benefit of lifetime learning credit.