Sara’s daughter Tara completed her senior year of college in 2017. Sara paid $5,

Question

Sara’s daughter Tara completed her senior year of college in 2017. Sara paid
$5,000 in qualified education expenses for Tara in 2017. Sara is a single
taxpayer and has an AGI of $50,000 for 2017. What, if any, education credit may
Sara claim and how much is the credit?

a.

American Opportunity Tax Credit in the amount of $1,800.

b.

Lifetime Learning Credit in the amount of $2,000.

c.

Sara is not eligible to claim an education credit.

d.

American Opportunity Tax Credit in the amount of $2,500.

a.

American Opportunity Tax Credit in the amount of $1,800.

b.

Lifetime Learning Credit in the amount of $2,000.

c.

Sara is not eligible to claim an education credit.

d.

American Opportunity Tax Credit in the amount of $2,500.

Explanation / Answer

As per IRS website,
"The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student."

Hence, she can claim a maximum of $2500 of American Opportunity Tax Credit. Option D

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