Back to School Education Tax Credits

by | Oct 14, 2015 | Credit, Education, Taxes

Below is information provided by our friends at the IRS:

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. Here are some tips on claiming an education-related tax credit on your federal tax return:

  • American Opportunity Tax Credit.The?AOTC?is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. 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.The?Lifetime Learning Credit?is worth up to $2,000 on your tax return. There is no 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 qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student,?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 related expenses for an eligible student.
  • Eligible educational institutions.Eligible schools?are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren?t sure if your school is eligible:
    • Ask your school if it is an eligible educational institution, or
    • See if your school is on the U.S. Dept. of Education?s Accreditation database.
  • Form 1098-T.?In most cases, you 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 instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you 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.

REMEMBER:?INCOME LIMITS

These credits are subject to income limitations and may be reduced or eliminated, based on your income.

USEFUL RESOURCES:

8 Tax Savers for Parents

by | Mar 4, 2014 | Education, Savings, Taxes

From IRS Tax Tips:

Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1.?Dependents.? In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.

2.?Child Tax Credit.? You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3.?Child and Dependent Care Credit.? You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.

4.?Earned Income Tax Credit.? If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.

5.?Adoption Credit.? You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.

6.?Higher education credits.? If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.

7.?Student loan interest.? You may be able to deduct interest you paid on a qualified student loan, even if you don?t itemize deductions on your tax return. For more information, see Publication 970.

8.?Self-employed health insurance deduction.? If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See IRS Notice 2010-38 for information.

You can also watch IRS YouTube Videos on these subjects: