In: Accounting
Solution:-
Compare and contrast the lifetime learning credit with American opportunity credit:-
The credits are similar in the sense that they are credits for postsecondary education. Also, a taxpayer may claim either credit for qualifying expenditures they make on behalf of the taxpayer, spouse, or dependent of the taxpayer. Both credits are phased-out based on AGI and both credits are at least partially non-refundable. The credits are different in the sense that qualifying expenditures for the American opportunity credit (AOC) include tuition, fees, and required course materials (including books) while qualifying expenditures for the lifetime learning credit includes tuition and fees but not required course materials. Further, the AOC applies only to the first four years of postsecondary education while the lifetime learning credit has no such restriction. Also, the AOC carries a per student limit (a taxpayer may claim more than one credit in a year if the taxpayer pays the education costs of more than one student) while the lifetime learning credit limit is a per taxpayer credit (the taxpayer may claim only one credit per year). The maximum AOC (per student) for a year is $2,500 while the maximum lifetime learning credit for a taxpayer is $2,000. Finally, the AOC phases out at higher levels of AGI than the lifetime learning credit and 40% of the otherwise allowable AOC is refundable while the entire lifetime learning credit is non-refundable.