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Education Tax Credits and Deductions

College Students: Education Tax Credits and Deductions

Tax credits and deductions can help taxpayers with their higher education expenses. Whether you’re a parent paying for your child’s education or you’re a student funding your own education, there is a tax credit or deduction for you.

A tax credit reduces that amount of income tax you have to pay. There are two education tax credits, the American Opportunity Credit and the Lifetime Learning Credit.

American Opportunity Credit

The American Opportunity Credit helps parents and students pay for up to four years of post-secondary education. This credit is valid through December 2017 and is only available for four tax years. It is best for those financing an undergraduate degree. The maximum annual credit amount is $2,500 per student.

You can claim the American Opportunity Credit if the following requirements are met:

·          You pay qualified education expenses of higher education. A qualified expense is tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance.

·          You pay the education expenses for an eligible student

·          The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return

·          Qualified expenses were paid in 2013 for academic periods beginning in 2013 or beginning the first three months of 2014.

·          The student’s or persons claiming the student modified adjusted gross income is $80,000 or less , or $160,000 or less for married couples filing a joint return. 

·          The American Opportunity Credit, Hope Credit, or a combination of both was not claimed in at least four prior tax years for the student

·          The student or persons claiming the student are not taking a tuition and fees deduction.

An American Opportunity Credit eligible student meets the following criteria:

·          The student is pursuing a program leading to a degree or other recognized credentials

·          The student must be enrolled at least half time for at least one academic period that begins during the tax year.

·          At the end of 2013 the student does not have a felony drug conviction

·          The student did not complete the first 4 years of postsecondary education before the beginning of the tax year.

Once you determine that the student meets the requirements and would like to claim the American Opportunity Credit you should complete Form 8863 and submit it with your 1040 or 1040A Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40.

 

Lifetime Learning Credit

If you are or are funding the education of a graduate student or a student enrolled in a non-degree seeking program, the Lifetime Learning Credit may be best for you. The credit is available for all years of post-secondary education and for courses needed to acquire or improve job skills. There is no limit on the number of years that the credit can be claimed or minimum course load. The maximum credit amount is $2,000 per return

You can claim the Lifetime Learning Credit if the following requirements are met:

·          You qualified education expenses of higher education. A qualified expense is tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance.

·          You pay the education expenses for an eligible student

·          The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return

·          The student’s or persons claiming the student modified adjusted gross income is $62,000 or less , or $124,000 or less for married couples filing a joint return. 

·          Qualified expenses were paid in 2013 for academic periods beginning in 2013 or beginning the first three months of 2014.

·          The American Opportunity Credit is not being claimed for the same tax year.

·          The student or person claiming the student is not taking tuition and fees deduction.

A Lifetime Learning Credit eligible student meets the following criteria:

·          Must be enrolled in one or more courses at an eligible education institution

Once you determine that the student is eligible and  meets the requirements and would like to claim the Lifetime Learning Credit you should complete Form 8863 and submit it with your 1040 or 1040A Enter the credit on Form 1040, line 49, or Form 1040A, line 31.

 

If the student does not qualify for a tax credit, he or she may be eligible for a tax deduction.

Tuition and Fees Tax Deduction

A tax deduction reduces the amount of income that is subject to tax and generally reduces the amount of tax that you are required to pay. In some instances you may deduct tuition and fees from your taxable income. The tuition and fees deduction can reduce the amount of your income subject tax by up to $4,000.

You can claim a Tuition and Fees Deduction if the following requirements are met:

·          You pay qualified education expenses of higher education. A qualified expense is tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials

·          You pay the education expenses for an eligible student

·          The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return

·          Your filing status is not married filing separately

·          You modified adjusted gross income is $80,000 or less , or  $160,000 or less if filing a joint return

·          You were not a nonresident alien for any part of the year and elected to be treated as a resident alien for tax purposes

·          You are not claiming an education credit for expenses of the student for whom the qualified education expenses are paid.

Tuition and Fees Deduction eligible student meets the following criteria:

·          Must be enrolled in one or more courses at an eligible education institution

To take this deduction you must fill out Form 8917. Because this in adjustment to income, you can claim this deduction even if you do not itemize deductions on Schedule A (form 1040).

 

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