Under what conditions can a taxpayer claim the full \$2,500 American Opportunity Credit for qualified education expenses?

• A. By being enrolled in any college course, regardless of expenses or income.
• B. By paying at least \$4,000 in qualified education expenses and having a modified adjusted gross income (MAGI) below the phase-out threshold.
• C. By claiming any amount of student loan interest paid during the year.
• D. By having a MAGI above the phase-out threshold and paying at least \$2,500 in expenses.

Answer: (B)

Verified step by step guidance

1. Understand the American Opportunity Credit: This is a tax credit for qualified education expenses paid for an eligible student for the first four years of higher education. It can reduce the amount of tax owed and is partially refundable.
2. Identify the eligibility criteria: To claim the full \$2,500 credit, the taxpayer must pay at least \$4,000 in qualified education expenses. Qualified expenses include tuition, fees, and course materials required for enrollment or attendance.
3. Consider the income limitation: The taxpayer's modified adjusted gross income (MAGI) must be below the phase-out threshold. The phase-out begins at \$80,000 for single filers and \$160,000 for married filing jointly, and the credit is completely phased out at \$90,000 and \$180,000, respectively.
4. Exclude other incorrect options: Being enrolled in any college course, regardless of expenses or income, does not qualify for the full credit. Similarly, claiming student loan interest paid or having a MAGI above the phase-out threshold does not meet the requirements for the full \$2,500 credit.
5. Summarize the conditions: To claim the full \$2,500 American Opportunity Credit, the taxpayer must pay at least \$4,000 in qualified education expenses and have a MAGI below the phase-out threshold.