Oregon Tax Consultants Practice Exam

Which of the following is considered a qualified educational benefit for both the American Opportunity Credit and the Lifetime Learning Credit?

1. Transportation costs

2. Medical expenses

3. Tutoring services

4. Tuition and books

The correct answer is: Tuition and books

Tuition and books are considered qualified educational benefits for both the American Opportunity Credit and the Lifetime Learning Credit because both credits are designed to help offset the cost of higher education. The American Opportunity Credit allows taxpayers to claim a credit for qualified education expenses incurred for an eligible student during the first four years of higher education. Qualified expenses that can be claimed include tuition and fees required for enrollment, as well as required books, supplies, and equipment. Similarly, the Lifetime Learning Credit is applicable for a broader range of education expenses and can be claimed for any year of higher education. It covers tuition and fees for courses that help individuals acquire or improve job skills, and importantly, it also includes the expenses for required course materials, which would be the books. In contrast, transportation costs, medical expenses, and tutoring services do not meet the criteria for qualified expenses under these credits. While they might be relevant costs associated with education, they are not included in the definition of qualified educational expenses for the purpose of claiming either of these tax credits.