Chapter 15 - Terms (Educational Provisions)

Question 1

American Opportunity Tax Credit (AOTC).

Answer 1

A credit paid for qualifying education expenses paid for eligible students. One restriction is that the expenses must be for the first four years of higher education. The AOTC may be partially refundable.

Question 2

Credits

Answer 2

A direct reduction of tax liability allowed for various purposes to taxpayers who meet the qualifications. Some credits are refundable; that is, the IRS will send the taxpayer a refund for any amount in excess of the tax liability. Some credits are nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be carried to other tax years.

Question 3

Lifetime Learning Credit

Answer 3

A nonrefundable credit equal to 20% of the first $10,000 of qualified higher education tuition and fees paid during the year on behalf of the taxpayer, their spouse, or their dependents.

Question 4

Nonrefundable Credit

Answer 4

A credit which cannot exceed the taxpayer’s tax liability.

Question 5

Refundable Credit

Answer 5

A credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer’s tax liability.

Question 6

Tuition and Fees Deduction

Answer 6

An above-the-line deduction of up to $4,000 per tax return for qualified tuition and course-related expenses. The amount of the deduction is figured on Form 8917.