Question

In 2020, Laureen is currently single. She paid $2,720 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen ($2,720 each for a total of $5,440). Sheri and Meri qualify as Laureen’s dependents. Laureen also paid $1,910 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University. Finally, Laureen paid $1,410 for herself to attend seminars at a community college to help her improve her job skills. (Leave no answer blank. Enter zero if applicable.)

a. What is the maximum amount of education credits Laureen can claim for these expenditures? Laureen's AGI is $45,000. If Laureen claims education credits for her three children and herself, how much credit is she allowed to claim in total? If she claims education credits for her children, how much of her children’s tuition costs that do not generate credits may she deduct as for AGI expenses?

     

     

Answer 1

a. The Maximum amount of education credit Laureen can claim for these expenditures is $2500 per eligible student. The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.Adjusted Gross must be less than or equal to $80000 to qualify for this American opportunity tax credit.She can only claim the credit for a year during which the student carries at least a half-time course load for a minimum of one semester beginning in that year.

The maximum lifetime learning credit for an individual(Laureen) tax year is $2,000 per tax return but the individual should have at least $10000 expenses to be eligible for full deduction.The LLC is available for certain expenses for a class to acquire and improve job skills. Adjusted Gross must be less than or equal to $69000 to qualify for this lifetime learning credit.

If Laureen claims education credit for her three children and herself the credit she allowed to claim are as follows:

American opportunity tax credit

Sheri and Meri:Nil(As twin daughters to attend university as freshmen. To qualify for credit by Laureen the twin daughters should carries a half time course load for minimum of one semester beginning in that year.

Ryan:$1910(Maximum limit=$2500)

Lifetime learning credit:

Eligible expenses=2720+2720+1910+1410=8760

Laureen herself can claim upto credit of 1752(8760*20%)

Laureen Credit=$1410

Total education credit Laureen is allowed to claim is $3320(1910+1410)

As Laureen has claim education credit for her children that is $1910 the remaining $5440 which do not generate credit. She can deduct upto $4000 out of remaining $5440 as her Adjusted Gross income is less than $65000.

AGI EXPENSES DEDUCTION=$4000.