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Back-to-School Education Tax Credits

8/10/2015

 
If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time.  You may be able to claim a tax credit on your federal tax return.  Here are some key IRS tips that your should know about education tax credits:

  • American Opportunity Tax Credit (AOTC).  The AOTC is wroth up to $2,500 per year for an eligible student.  You may claim this credit only for the first four years of higher educaiton.  Forty percent of the AOTC is refundable.  That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit (LLC).  The LLC is worth up to $2,000 on your tax return.  There is not limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student.  You can claim only one type of education credit per student on your tax return each year.  If more than one student qulifies for a credit in the same year, you can claim a different credit for each student.  For instance, you can claim the OATC for one students, and claim the LLC for the other.
  • Qualified expenses.  You may use qualified expenses to figure your credit.  these include the costs you pay for tuition, fees and other elated expenses for an eligible student.  Refer to IRS.gov for more on the rules that apply to each credit.
  • Eligible education institutions.  Eligible schools are those that offer education beyond high school.  This includes most colleges and universities.  Vocations schools or other post-secondary schools may also qualify.  If your aren't sure if your school is eligible:
  1. Ask our school if it is an eligible education institutions,or
  2. See if your school is on the U.S. Department of Education's Accreditation database.
  • Form 1098-T.  In most cases, your should receive Form 1098-T, Tuition Statement, from your school by Feb 1, 2016.  This form reports your qualified expenses to the IRS and to you.  the amounts shown on the form may be different than the amounts you actually paid.  That might happen because some of your related costs may not appear on the form.  For instances, the cost of your textbooks may not appear on the form.  However, you still may be able to include those costs when your figure your credit.  Don't forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Nonresident alien.  If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support.  To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer to Publication 519, U.S. Tax Guide for Aliens.
  • Income limits.  These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits.  Visit the IRS Education Credits web page to learn more.  Also see Publication 970, Tax Benefits for Education.  You can get it on IRS.gov.

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  • Home
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          • Adoption
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        • Affordable Care Act - Individuals
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      • Businesses >
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        • Year-end Reporting Obligations >
          • 1099's
          • Health Insurance Premiums
          • Depreciation
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          • Company Automobiles
        • Employment Tax Credits
        • Independent Contractors
        • Tax Credits and Deductions for Businesses
        • Other Business Topics
        • Required Business Posters
      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
        • All About Past Due Tax Returns
        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams