Question

What would be the most advantageous eduction credit for the Cumberlands if their modified AGI was $165,000? American Opportunity Credit (AOTC) for $1,500 as a nonrefundable credit and $1,000 as a refundable credit. American Opportunity Credit (AOTC) for $1,125 as a nonrefundable credit and $750 as a refundable credit. American Opportunity Credit (AOTC) for $2,500 as a refundable credit. Lifetime learning credit for $2,000 as a nonrefundable credit.

Answer 1

The Lifetime Learning Credit, which provides up to $2,000 as a nonrefundable credit, is the most beneficial for the Cumberlands with a modified AGI of $165,000 since AOTC phases out for higher incomes.

Step-by-step explanation:

The most advantageous education credit for the Cumberlands with a modified AGI of $165,000 would likely be the Lifetime Learning Credit for $2,000 as a nonrefundable credit.

At an AGI of $165,000, the Cumberlands may be phased out of both the refundable and nonrefundable portions of the American Opportunity Tax Credit (AOTC), which begins to phase out at $160,000 for married filing jointly and is not available at all for those with AGI exceeding $180,000.

The Lifetime Learning Credit, on the other hand, offers a nonrefundable credit of up to $2,000, with no limit on the number of years it can be claimed, and it phases out at higher income levels, allowing some benefit even at the $165,000 AGI level.