Question

Taxation Question

14) Which of the following statements is not true regarding the education credits? A) The American opportunity tax credit is only available for the first two years of postsecondary education. B) The lifetime learning credit is limited to $2,000 per taxpayer per year. C) The American opportunity tax credit is limited to $2,500 per student per year. D) A taxpayer cannot receive the American opportunity tax credit if he/she has a felony drug conviction. 15) Which of the following statements is true about education credits? A) A taxpayer may be eligible to claim the education credits regardless of their AGI amount. B) A taxpayer can use the same qualifying expenses for both the American opportunity tax and lifetime learning credits. C) A taxpayer cannot claim an American opportunity tax credit or lifetime learning credit in the same year he/she takes a tax-free distribution from a Coverdell Education Savings Account. D) The lifetime learning credit may be limited by AGI levels and may completely phase out when modified AGI exceeds a certain amount (the amount depending on the tax year). 16) Which of the following statements is not true regarding the education credits? A) If a dependent pays for qualified expenses, the expenses are deemed paid by the taxpayer B) If a relative makes payments for qualified expenses directly to the institution on behalf of the student, the expenses are deemed paid by the student.

Answer 1

14. Answer is option A

The American Opportunity Tax credit is only available for the first two years of postsecondary education.

The American Opportunity Credit tax is available for individuals who are beyond the first two years of post-secondary education.

15. Answer is option D

The lifetime learning credit may be limited by AGI levels and may completely phase out when modified AGI exceeds a certain amount (the amount depending on the tax year)

The threshold limit for Lifetime Learning Credit is prescribed every year. No lifetime learning credit is available to a taxpayer if his/her AGI exceeds beyond that limit.

16. Answer is option D

Payments made using borrowed funds are not considered qualified expenses

Payments made using earned income are considered qualified expenses for deductions.