HRB UPDATED EXAM SCRIPT QUESTIONS AND
ANSWERS GRADED A+
✔✔There are some key differences between these two credits, AOTC and LL. One
important distinction is that the lifetime learning credit is nonrefundable, which means
that it is available to reduce a taxpayer's tax liability, but not below zero. A portion of the
AOTC, on the other hand, may be refundable to taxpayers (much like the Earned
Income Tax Credit or the Additional Child Tax Credit). Thus, taxpayers who take the
AOTC may lower their tax liability to zero and receive any additional AOTC amount in
their refund. - ✔✔Key differences between AOTC and LL
✔✔The taxpayer may only claim one education provision per qualifying student. This
means the AOTC and the lifetime learning credit cannot be claimed for the same
student in the same tax year. However, the AOTC and the lifetime learning credit may
be claimed by different students on the same tax return - ✔✔in the same year.
✔✔A taxpayer may, and should, claim the most - ✔✔advantageous education benefit.
✔✔A taxpayer may not claim an education benefit for expenses paid with tax-free
education assistance, including education assistance from an - ✔✔employer.
✔✔A deduction reduces the amount of income - ✔✔subject to tax.
✔✔A credit directly - ✔✔reduces tax.
✔✔The AOTC is a credit of up to $2,500 per eligible student, and up to 40% of the
credit ($1,000) may be - ✔✔refundable
✔✔Generally, a taxpayer may claim the AOTC if they meet all of the following
requirements:
The qualified education expenses are paid for an eligible student.
The eligible student is the taxpayer, spouse, or dependent for whom the taxpayer
actually claims an exemption.The taxpayer pays qualified education expenses for higher
education. This is explained in more detail in the Dependents section below. AOTC -
✔✔
✔✔A taxpayer may not claim the AOTC if any of the following 5 are true:
The taxpayer's filing status is MFS.
The taxpayer is claimed as a dependent on anyone else's tax return.
The taxpayer's modified adjusted gross income (MAGI) is above $90,000 ($180,000 for
MFJ).
The taxpayer (or spouse) was a nonresident alien for any part of 2018, and the
nonresident alien did not elect to be treated as a resident alien for tax purposes.
, The taxpayer claims the lifetime learning credit for the same student in 2018. - ✔✔5
exceptions to qualifying for the AOTC
✔✔For the AOTC, MAGI equals AGI plus:
Foreign earned income exclusion.
Foreign housing exclusion.
Foreign housing deduction.
Income excluded by bona fide residents of American Samoa.
Income excluded by bona fide residents of Puerto Rico. - ✔✔AOTC MAGI
✔✔For purposes of the AOTC, qualified education expenses are tuition and certain
related expenses required for enrollment or attendance at an eligible educational
institution. Expenses for books, supplies, and equipment needed for a course of study
are qualified education expenses, even if the materials are not purchased from the
educational institution. However, student activity fees are qualified educational
expenses only if they must be paid to the institution as a condition of enrollment or
attendance. - ✔✔AOTC Qualified Education Expenses
✔✔Expenses that do not qualify include insurance, medical, room and board,
transportation, and other personal or living expenses. Qualified expenses generally do
not include expenses that relate to any course that involves sports, games or hobbies,
or any noncredit course, unless the course is part of the student's degree program.
Qualified education expenses also do not include expenses for which a refund is
received, or expenses that are paid with tax-free education assistance, such as
nontaxable scholarships or Pell Grants. - ✔✔AOTC not qualified expenses
✔✔For 2018, an eligible student for the AOTC is a student who meets all of the
following conditions:
The student has not claimed an AOTC in any four earlier tax years.
The student did not complete the first four years (generally, the freshman, sophomore,
junior, and senior years) of postsecondary education before 2018.*
The student was enrolled at least half-time in a program leading to a degree, certificate,
or other recognized academic credential for at least one academic period beginning in
2018.**
The student had not been convicted of any federal or state felony for possessing or
distributing a controlled substance as of the end of 2018. - ✔✔eligible student for the
AOTC
✔✔Qualified educational expenses paid with tax-free funds may not be used to claim
the AOTC. Qualified expenses must be reduced by any nontaxable benefits (including
but not limited to):
Scholarships.
Grants.
Veterans' or military educational benefits.
ANSWERS GRADED A+
✔✔There are some key differences between these two credits, AOTC and LL. One
important distinction is that the lifetime learning credit is nonrefundable, which means
that it is available to reduce a taxpayer's tax liability, but not below zero. A portion of the
AOTC, on the other hand, may be refundable to taxpayers (much like the Earned
Income Tax Credit or the Additional Child Tax Credit). Thus, taxpayers who take the
AOTC may lower their tax liability to zero and receive any additional AOTC amount in
their refund. - ✔✔Key differences between AOTC and LL
✔✔The taxpayer may only claim one education provision per qualifying student. This
means the AOTC and the lifetime learning credit cannot be claimed for the same
student in the same tax year. However, the AOTC and the lifetime learning credit may
be claimed by different students on the same tax return - ✔✔in the same year.
✔✔A taxpayer may, and should, claim the most - ✔✔advantageous education benefit.
✔✔A taxpayer may not claim an education benefit for expenses paid with tax-free
education assistance, including education assistance from an - ✔✔employer.
✔✔A deduction reduces the amount of income - ✔✔subject to tax.
✔✔A credit directly - ✔✔reduces tax.
✔✔The AOTC is a credit of up to $2,500 per eligible student, and up to 40% of the
credit ($1,000) may be - ✔✔refundable
✔✔Generally, a taxpayer may claim the AOTC if they meet all of the following
requirements:
The qualified education expenses are paid for an eligible student.
The eligible student is the taxpayer, spouse, or dependent for whom the taxpayer
actually claims an exemption.The taxpayer pays qualified education expenses for higher
education. This is explained in more detail in the Dependents section below. AOTC -
✔✔
✔✔A taxpayer may not claim the AOTC if any of the following 5 are true:
The taxpayer's filing status is MFS.
The taxpayer is claimed as a dependent on anyone else's tax return.
The taxpayer's modified adjusted gross income (MAGI) is above $90,000 ($180,000 for
MFJ).
The taxpayer (or spouse) was a nonresident alien for any part of 2018, and the
nonresident alien did not elect to be treated as a resident alien for tax purposes.
, The taxpayer claims the lifetime learning credit for the same student in 2018. - ✔✔5
exceptions to qualifying for the AOTC
✔✔For the AOTC, MAGI equals AGI plus:
Foreign earned income exclusion.
Foreign housing exclusion.
Foreign housing deduction.
Income excluded by bona fide residents of American Samoa.
Income excluded by bona fide residents of Puerto Rico. - ✔✔AOTC MAGI
✔✔For purposes of the AOTC, qualified education expenses are tuition and certain
related expenses required for enrollment or attendance at an eligible educational
institution. Expenses for books, supplies, and equipment needed for a course of study
are qualified education expenses, even if the materials are not purchased from the
educational institution. However, student activity fees are qualified educational
expenses only if they must be paid to the institution as a condition of enrollment or
attendance. - ✔✔AOTC Qualified Education Expenses
✔✔Expenses that do not qualify include insurance, medical, room and board,
transportation, and other personal or living expenses. Qualified expenses generally do
not include expenses that relate to any course that involves sports, games or hobbies,
or any noncredit course, unless the course is part of the student's degree program.
Qualified education expenses also do not include expenses for which a refund is
received, or expenses that are paid with tax-free education assistance, such as
nontaxable scholarships or Pell Grants. - ✔✔AOTC not qualified expenses
✔✔For 2018, an eligible student for the AOTC is a student who meets all of the
following conditions:
The student has not claimed an AOTC in any four earlier tax years.
The student did not complete the first four years (generally, the freshman, sophomore,
junior, and senior years) of postsecondary education before 2018.*
The student was enrolled at least half-time in a program leading to a degree, certificate,
or other recognized academic credential for at least one academic period beginning in
2018.**
The student had not been convicted of any federal or state felony for possessing or
distributing a controlled substance as of the end of 2018. - ✔✔eligible student for the
AOTC
✔✔Qualified educational expenses paid with tax-free funds may not be used to claim
the AOTC. Qualified expenses must be reduced by any nontaxable benefits (including
but not limited to):
Scholarships.
Grants.
Veterans' or military educational benefits.
