In the fall of 2014,James went back to school to earn a master of accountancy degree.He incurred $7,000 of qualified educational expenses and his modified AGI for the year was $40,000.His Lifetime Learning Credit is

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The Lifetime Learning Credit is equal to 20% of the first $10,000 of qualified educational expenses, up to a maximum credit of $2,000. However, the credit begins to phase out at specific modified AGI levels, and for 2014, the phaseout range was $54,000 to $64,000 for taxpayers who are married filing jointly, and $27,000 to $32,000 for all other taxpayers. Since James' modified AGI of $40,000 is below the phaseout range, he can claim the full credit of 20% of $7,000, which is $1,400 (answer B).

In the Fall of 2014,James Went Back to School to Earn