The Education Tax Credit is a great way to save on your taxes, but who exactly qualifies for it? Find out everything you need to know about this tax credit and how to claim it on your taxes.
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The American Opportunity Tax Credit
The American Opportunity Tax Credit is a tax credit for eligible education expenses paid for an eligible student for the first four years of higher education. The credit is worth up to $2,500 per eligible student. The credit is refundable, which means that if you have no tax liability, you can receive up to $1,000 as a refund from the government.
What is the AOTC?
The American Opportunity Tax Credit (AOTC) is a credit for undergraduate students, including those pursuing a certificate, and their parents or guardians. The AOTC may be claimed for each eligible student in the family for up to four years of post-secondary education. The AOTC is partially refundable, which means you may receive a refund even if you owe no tax. To be eligible, you must be enrolled at least half time in a program leading to a degree or other recognized credential at an eligible institution. You must also not have completed the first four years of post-secondary education before the beginning of the tax year.
How much is the AOTC worth?
The AOTC is worth up to $2,500 per eligible student. The credit covers 100% of the first $2,000 of eligible expenses and 25% of the next $2,000 of eligible expenses. Eligible expenses include tuition and required fees, as well as course-related books, supplies, and equipment.
Who is eligible for the AOTC?
To be eligible for the AOTC, you must:
-Have earned income from working
-Pay for qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return
-Meet the IRS’s definition of a student enrolled at least half-time for one academic period during the tax year
-Not have completed the first four years of post-secondary education before the beginning of the tax year
-Not have claimed the AOTC or Hope Scholarship Credit for more than four tax years
If you’re married filing separately, you cannot claim the AOTC.
The Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is a tax credit that helps with the costs of post-secondary education. The LLC can be claimed for an unlimited number of years and there is no limit on the amount of money that can be claimed. To qualify, the student must be enrolled in a degree or certificate program. The student does not have to be pursuing a degree to qualify, and there is no age limit. The LLC can be claimed for courses that are taken to improve job skills as well.
What is the LLC?
The Lifetime Learning Credit (LLC) is a tax credit that helps offset the cost of post-secondary education. It can be used for an unlimited number of years, and there is no limit on the amount of money that can be claimed. To be eligible, you must be enrolled in an eligible educational institution on at least a half-time basis. You must also be taking courses to acquire or improve job skills.
How much is the LLC worth?
The credit is worth 20% of the first $10,000 you spend on qualifying education expenses per tax year, for a maximum credit of $2,000. That means you can get a credit for up to $4,000 in eligible expenses if you’re Claiming the LLC for both yourself and your spouse.
Who is eligible for the LLC?
To be eligible, you must be enrolled in an eligible educational institution and you, or your spouse if filing jointly, must not have completed the first four years of postsecondary education before the beginning of the tax year. You also must not have claimed the American Opportunity Tax Credit for more than four tax years. In addition, your modified adjusted gross income (MAGI) must be less than $66,000 ($132,000 if married filing jointly).
The Tuition and Fees Deduction
The Tuition and Fees Deduction is an education tax credit that allows you to deduct up to $4,000 from your taxable income. This deduction is available for both undergraduate and graduate level courses. To qualify, you must be enrolled in a degree program at an eligible institution.
What is the Tuition and Fees Deduction?
The Tuition and Fees Deduction permits qualifying taxpayers to deduct certain education expenses paid for themselves, their spouses, or their dependent children. The deduction is meant to offset the cost of higher education and is available to filers regardless of whether they itemize their deductions.
In order to qualify, taxpayers must have paid eligible tuition and fees for themselves, their spouse, or a dependent as long as the student was enrolled at an eligible institution within the last 12 months. An eligible institution includes any college, university, vocational school, or other post-secondary educational institution that is accredited by a nationally recognized accrediting agency.
There are income limitations in place for taxpayers claiming the deduction. For those using married filing jointly status, the Modified Adjusted Gross Income (MAGI) must be less than $160,000. Other filing statuses have different income limitations that can be found on the IRS website.
Taxpayers can deduct up to $4,000 of eligible expenses paid per year. This amount is reduced by any tax-free scholarships or fellowships as well as employer-provided educational assistance that was used to pay for qualified expenses. If married filing separately, each spouse is only able to claim up to $2,000 in deductions.
A taxpayer can elect to take either the tuition and fees deduction or claim one of the education tax credits on their taxes; however, they cannot take both for the same student in the same year.
How much is the Tuition and Fees Deduction worth?
The maximum deduction is $4,000. The amount of the deduction is gradually reduced and eventually eliminated entirely by AGI phaseouts for single filers with incomes between $65,000 and $80,000 ($130,000 and $160,000 for joint filers). There is no deduction for taxpayers with AGI of $80,000 or more ($160,000 or more for joint filers).
Who is eligible for the Tuition and Fees Deduction?
To be eligible for the Tuition and Fees Deduction, you must:
– Have paid qualifying educational expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your federal tax return
– Have been enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution
– Not have been claimed as a dependent on another person’s tax return
For more information on the Tuition and Fees Deduction, including how to claim it, please visit the IRS website.