Q. So the bottom line seems to be that I should change that to $4000, correct?
A. Yes.
Q. Do I qualify for this credit because I spent at least $4000 on education expenses, and therefore I get $2500 tax credit?
A. Yes.
Q. What happens to any amount over $4000?
A. Nothing. The credit maxes out with $4000 of qualified expenses. You get 100% of the first $2000 of expenses and 25% of the next $2000.
The alternate credit is the Lifetime Learning Credit (LLC). It's 20% of the qualified expense up to $10,000 ($2000 max credit). The LLC does not have a refundable portion, so it can only offset a tax liability. Who would choose the LLC? Those no longer eligible for the AOTC; grad students, students/parents who already claimed the AOTC 4 times, less than half time undergrads, non degree seeking students.
