This is an excellent opportunity to remind tax professionals that their customers may be eligible for the American Opportunity Tax Credit as well as the Lifetime Learning Credit now that summer is over and students are back in the classroom. You must first ascertain who is qualified. You, your partner, or one of your offspring must be registered in a qualified institution, such as a private high school, a university or college that is accredited, or a vocational school. The approved education expenses must also be paid for by you, your partner, or a dependant.
Educational Tax Credits; Source- CNBC
Eligibility To Apply For Educational Tax Credits
If you submit your taxes as married individuals who file separately, if you are claimed as a dependent on another person’s return (such as your parents), if you are receiving another higher education benefit, or if you were a non-resident worker for any period of the year and didn’t choose to be a resident worker, you are not eligible to claim an education credit. For claiming the credits, there are income restrictions. If you’re married and filing jointly, the adjusted gross income you earned must be no more than $160,000 or $80,000, respectively. For single taxpayers, the credit phases off between $80,000 and $90,000, and for married individuals filing jointly, between $160,000 and $180,000. If the adjusted gross income you earned exceeds $90,000 for single taxpayers and $180,000 for married combined filers, you are ineligible.
All About American Opportunity Tax Credit
The AOTC, which took the place of the Hope credit in 2009, is a credit for approved education costs purchased during the first 4 years of higher education. The most credit a student may receive in a given year is $2,500. 40% of any residual credit is recoverable (up to $1,000) if the credit results in a tax balance owed of zero. Calculated eligible educational expenses up to $2,000 are eligible for a credit at 100%. A pupil must be registered at least half-time for a single academic period of the year and be working toward a degree or another certification to be qualified for the AOTC. The four-year degree couldn’t have been completed by the start of the financial year. Room and board, travel, personal expenses, and medical costs are not considered qualified educational costs.
All About Lifetime Learning Credit
Due to its ability to be utilized for courses leading to graduate, undergraduate, or specialist degrees, the LLC is far more versatile than the AOTC. The AOTC is only accessible for the initial four years of university, however, it can be utilized for classes that can assist students in developing or gaining employment skills. The fact that there is no restriction on how many years you can assert the LLC is another significant distinction. You may claim up to $2,000; the credit’s amount is determined by taking 20% of the initial $10,000 in admissible educational costs. Students must be registered in a minimum of one academic period each year at an approved institution, or be taking courses there. The courses must also result in the achievement of a degree, a certification, or the development of new or improved employment skills. The LLC is not refundable, in contrast to AOTC.
