Question

Paul and Tiffany have three dependent children studying at Matheson University. Luke is a senior, Chloe is a junior, and Tom is a freshman. Paul and Tiffany are filing their taxes and want to use the American Opportunity Tax Credit and Lifetime Learning Credit to their greatest advantage. Assuming they qualify for both credits, which of these statements is CORRECT?

A) They can use the American Opportunity Tax Credit for qualified education expenses for Tom and use two Lifetime Learning Credits for Luke and Chloe.
B) They can only take one credit for each child—whichever credit will give them the greatest advantage.
C) They can use the American Opportunity Tax Credit for the qualified education expenses of Chloe and use two Lifetime Learning Credits for Luke and Tom.
D) They can use one American Opportunity Tax Credit for the qualified education expenses of Tom and Chloe and use one Lifetime Learning Credit for Luke.

Answer 1

The best option for maximizing education credits for Paul and Tiffany is Option A, which allows them to use the American Opportunity Tax Credit for Tom, a freshman, and the Lifetime Learning Credit for Luke and Chloe, who are beyond their first four years of college.

Step-by-step explanation:

The correct option : a

The correct statement for Paul and Tiffany to utilize the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) for their children at Matheson University is They can use the American Opportunity Tax Credit for qualified education expenses for Tom and use two Lifetime Learning Credits for Luke and Chloe. This strategy utilizes the credits to their greatest advantage, allowing them to maximize their tax benefits.

The AOTC is only available for the first four years of post-secondary education, which typically includes the freshman through senior years, and can provide a credit for up to $2,500 per student. Since Tom is a freshman, he is the only one eligible for the AOTC. The LLC, on the other hand, is not limited to the first four years and provides up to $2,000 per tax return, not per student. Since Luke is a senior and Chloe is a junior, they are both beyond the first four years of college and only eligible for the LLC.

Remember that taxpayers cannot claim both credits for the same student in the same year. Therefore, Paul and Tiffany must choose the most beneficial way to apply these credits among their three children.