Exam (elaborations)
HRB CHAPTER 9 QUESTIONS AND VERIFIED ANSWERS
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A credit paid for qualifying education expenses paid for eligible students. Onelimitation is that the expenses must be for the first four years of higher
education. The AOTC may be partially refundable. - ANSWER American
Opportunity Tax Credit (AOTC)
A direct reduction of tax liability allowed for various purposes to taxpayers that
meet the qualifications. Some credits are refundable; that is, the IRS will send
the taxpayer a refund for any amount in excess of the tax liability. Some credits
are nonrefundable; that is, they can only reduce tax liability to zero. Some
credits may be carried to other tax years. - ANSWER Credits
A nonrefundable credit equal to 20% of the first $10,000 of qualified higher
education tuition and fees paid during the year on behalf of the taxpayer,
spouse, or dependents. - ANSWER Lifetime learning credit
A credit which cannot exceed the taxpayer's tax liability. - ANSWER
Nonrefundable credit
A credit for which the IRS will send the taxpayer a refund for any amount in
excess of the taxpayer's tax liability. - ANSWER Refundable credit
Determine eligibility for the American Opportunity Tax Credit and calculate the
credit. - ANSWER Compare AOTC with Lifetime learning criteria
, Prepare Form 8867, Paid Preparer's Due Diligence Checklist, for the American
Opportunity Tax Credit accurately. - ANSWER Form 8867
Determine eligibility for the lifetime learning credit and calculate the credit. -
ANSWER Lifetime learning criteria
Compare/contrast the two education benefits in determining the best benefit for
the taxpayer. - ANSWER Compare AOTC with Lifetime learning criteria
There are some key differences between these two credits, AOTC and LL. One
of the differences between the two is the lifetime learning credit is
nonrefundable; it offsets the taxpayer's liability only to a minimum of zero. The
AOTC partially may be refundable to the taxpayer - much like the Earned
Income Tax Credit or the Additional Child Tax Credit. Thus, the taxpayer who
takes the AOTC may have reduced their tax liability to zero and gets the
remaining of the AOTC amount as refund. - ANSWER Key differences
between AOTC and LL
The taxpayer is allowed only one education provision per qualifying student.
This denies the AOTC and the lifetime learning credit from being claimed for
the same student in the same tax year. However, the AOTC and lifetime
learning credit may be claimed by different students on the same tax return -
ANSWER in the same year.
A taxpayer may, and should, claim the most - ANSWER advantageous
education benefit.
A taxpayer may not claim an education benefit for expenses paid with tax-free
education assistance, including education assistance from an - ANSWER
employer.
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