In each of the following cases, certain qualifying education expenses were paid during the tax year for individuals who were the taxpayer, spouse, or dependent. The taxpayer has a tax liability and no other credits. Required: Determine the amount of the American opportunity tax credit (AOTC) and/or the lifetime learning credit that should be taken in each instance.

Completed question is

In each of the following cases, certain qualifying education expenses were paid during the tax year for individuals who were the taxpayer, spouse, or dependent. The taxpayer has a tax liability and no other credits. Determine the amount of American Opportunity Tax credit (AOTC) and/or lifetime learning credit that should be taken in each instance.

a)Single individual with modified AGI of $32,900 and expenses of $3,300 for a child who is a full-time college freshman.

b)Single individual with modified AGI of $44,500 and expenses of $3,800 for a child who is a full-time college junior.

c)Couple married filing jointly with modified AGI of $79,300 and expenses of $8,000 fora child who is a full-time graduate student.

Answer is

The $2,325 AOTC

The $2,450 AOTC

Explanation:

a. The AOTC is $2,325 (100% of the first $2,000 and 25% of the remaining $1,300). Lifetime learning credit is

=$3,300 x 20%

=$660

The AGI limitations do not apply. There, the $2,325 AOTC should be carried.

b. The AOTC is $2,450 (100% of the first $2,000 and 25% of the remaining $1,800). Lifetime learning credit is =$3,800 x 20%

=$760

The AGI limitations do not apply. Therefore, the $2,450 AOTC should be carried.

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