Back to School Tips on Tax Credits for Education
Most schools are now in session and with those preparations complete, now might be a good time to think about any tax savings you may receive for qualified expenses paid for higher level education. These expenses are usually reported on a Form 1098-T that will be sent to the IRS and you.
If you are paying for college this year, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) may reduce the amount of tax you owe on your federal return. Be sure to check with your accountant to see if you and your student meet the eligibility requirements for each of these credits. In addition, you will need to make sure the school your student is attending is an eligible school.
The AOTC can get you a credit as high as $2,500 per year for the first four years of college. Forty percent of the credit is refundable even if you don’t owe any tax.
The LLC is worth up to $2,000 per year and there is no limit to the number of years you can claim it.
Please keep in mind that education credits are subject to, and may be reduced or eliminated, based on the amount of your income. If you have any questions about these credits and how they may apply to you, please contact your accountant.