Bernadette, a longtime client of yours, is an architect and the president of the

Question

Bernadette, a longtime client of yours, is an architect and the president of the local Rotary chapter. To keep up to date with the latest developments in her profession, she attends continuing education seminars offered by the architecture school at State University. During 2014, Bernadette spends $2,000 on course tuition to attend such seminars. She also spends another $400 on architecture books during the year. Bernadette’s son is a senior majoring in engineering at the University of the Midwest. During the 2014 calendar year, Bernadette’s son incurs the following expenses: $8,200 for tuition ($4,100 per semester) and $750 for books and course materials. Bernadette’s son, whom she claims as a dependent, lives at home while attending school full-time. Bernadette is married, files a joint return, and has a combined AGI with her husband of $110,000. a. Calculate Bernadette’s education tax credit for 2014

1. Determine the 1) American opportunity credit, and 2) lifetime learning credit.

2. Determine the 1) nonrefundable and 2) refundable education tax credit.

Explanation / Answer

Answer: Bernadette’s son will get the American Opportunity Credit of $2,500; while she will receive the Lifetime Learning Credit of $2,000 but there is some limitation. In addition, since Bernadette is continuing her education, the remaining amount that was not credit for Bernadette can be used for business expense if she chooses to itemize her deduction.

Lifetime Learning Credit 2000 20% 400 Less: Phase out for AGI limits -40 Total Lifetime Learning Credit 360 Bernadette Son's Credit 2500 Total education credit 2860

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