Question

A. John has two sons. David is 3-year-old, and Tommy turned 13 on May 1st in 2018. John paid a local daycare provider $12,000 for David from January through December and $3,000 for Tommy from January through June. John’s earned income is 60,000. What is the maximum amount of qualified expenses John can use to figure the child and dependent care credit? a) $15,000 b) $ 5,000 c) $ 6,000 d) $ 3,000

B. Amy is single and works part-time at a local company. During the year, she paid $3,800 in tuition and fees to enroll in classes at the local community college. This was her second year attending college to work toward her bachelor’s degree. She purchased her course materials from a friend for $300. She had not been convicted of a felony for possessing or distributing a controlled substance at the end of 2018. Her modified adjusted gross income (MAGI) is $38,000. Assuming she otherwise qualifies, which education credit best benefits Amy and what amount of credit is she entitled to claim? a) Lifetime Learning Credit: $820 b) Lifetime Learning Credit: $760 c) American Opportunity Credit: $2,450 d) American Opportunity Credit: $2,500

C. Alicia’s 18-year-old son is a freshman at a local college. She paid the required tuition and fees for her son and received a Form 1098-T. She is wondering whether she is eligible to claim an education credit on her 2018 tax return. Which of the following statements is correct? a) The Lifetime Learning Credit offers a higher maximum credit amount than the American Opportunity Credit b) The phase-out amount based on the taxpayer’s AGI for the Lifetime Learning Credit is greater than for the American Opportunity Credit. c) Both the American Opportunity Credit and the Lifetime Learning Credit are nonrefundable tax credits. d) If the student has been convicted of a felony for possessing or distributing a controlled substance as of the end of 2018, he is not eligible for the American Opportunity Credit.

D. Shelly, single, is a full-time elementary school teacher. She is interested in learning the basics of information technology to improve her current job skills and enrolled in a couple of IT courses at the local college. Shelly paid $3,500 for tuition and fees and $300 for textbooks from a local bookstore (not required by the institution). She received a Form 1098-T. Her AGI is $56,000 and her tax liability on Form 1040, line 11 is $5,625. Shelly has never been convicted of a felony for possessing or distributing a controlled substance. Which education credit is Shelly eligible to claim and for what amount? a) American Opportunity Credit; $2,375 b) American Opportunity Credit; $2,450 c) Lifetime Learning Credit; $700 d) Lifetime Learning Credit; $760

Answer 1

A) B OPTION WILL BE THE ANSWER

B) B OPTION WILL BE THE ANSWER

C) D OPTION WILL BE THE ANSWER

D) A OPTION WILL BE THE ANSWER