Question

In one year, Corey earned $25,000 from his employer and a $300 capital gain from the sale of an investment. Corey doesn’t qualify for any deductions, but he can claim the lifetime learning credit.

Corey’s adjusted gross income is _____(a, b, or c), and his total tax due will be ______(1 or 2) by the credit.

a) $24,700

b) $25,000

c) $25,300

1. Decreased

2. Increased

Answer 1

Corey's adjusted gross income is $25,300, and his total tax due will be decreased by the Lifetime Learning Credit he can claim.

Step-by-step explanation:

Corey's adjusted gross income (AGI) consists of the income he receives from various sources, which includes his wages and capital gains from investments. In this case, Corey earned $25,000 from employment and a $300 capital gain. Though capital gains are typically included in AGI, for simplicity, we assume Corey's AGI is the sum of these two amounts, making his AGI $25,300 (option c). The Lifetime Learning Credit is a tax credit that can help pay for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills, and there are no limits on the number of years you can claim it. Since Corey can claim this credit, his total tax due will be decreased (option 1) by the credit.