Question

In 2018, Laureen is currently single. She paid $2,800 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen ($2,800 each for a total of $5,600). Sheri and Meri qualify as Laureen’s dependents. Laureen also paid $1,900 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University. Finally, Laureen paid $1,200 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?

a. Laureen’s AGI is $45,000. If Laureen claims education credits is she allowed to deduct as for AGI expenses tuition costs for her daughters that do not generate credits?

b. Laureen’s AGI is $95,000. What options does Laureen have for deducting her continuing education costs to the extent the costs don’t generate a credit?

c. Laureen’s AGI is $45,000 and Laureen paid $12,000 (not $1,900) for Ryan to attend graduate school (his fifth year not his junior year).

Answer 1

1. yes. Here the AGI of Lauren is $45K

For 2 of her daughter she can claim American opportunity tax credit, for qualified education expenses.

This is allowed for 2K per child and 25% of amount above 2K

So in this case per child expenses are 2800

Hence 2K is allowed and 25% of 800 is allowed

Per child that is allowed is 2200

For to child this is 4400

For Ryan this is 1900

So total credit of 6300 that can be AOTC.

Here Lauren also spend amount on learning and this is lifetime learning credit

This is allowed 2K or 20% of $10,000

So she can claim 20% of 1200 that is

240.

So the total deduction will be

6300+240=6540.

2. AOTC can only be claimed if the income is up to $90K and lifetime learning credit can only be claimed if the income is up to $56K

In this case neither the AOTC can be claimed nor can the Lifetime learning credits be claimed.

3. In this case for daughters the AOTC will be same as calculated in “A” that is $4400

For Ryan it will be calculated as below.

AOTC that is allowed is (2K +25% of amount paid up to 10K) or 4K whichever is less

So 2k+10,000*25%

So this gives 4500 hence 4k will only be allowed.

So AOTC of 4K+4400 and LLC of 240 can be claimed.