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Tax time is Always Right Around the Corner!
Taxes, we have to admit, are decidedly not fun. But they ARE necessary. Whether you are preparing your return or having a CPA prepare your return, do not forget to take advantage of the Education Tax Credits available. These credits can help offset the cost of your student’s education.
Two Credits Available
There are two tax credits available to you: The American Opportunity Tax Credit and Lifetime Learning Credit. The AOTC (American Opportunity Tax Credit) was made permanent by the Protecting Americans from the Tax Hikes Act signed in 2015. The AOTC allows credit to be claimed for four post-secondary education years instead of two. The AOTC/Lifetime Learning credits are based on the payment of “qualified tuition and related expenses.” These are the expenses for tuition and academic fees that are required for enrollment or attendance at an eligible educational institution. Qualified tuition and related expenses do not include student activity fees, athletic fees, insurance, room and board, transportation costs, and other personal living expenses. They also don’t include courses involving sports, games, or hobbies unless they’re part of the student’s degree program. Books are qualified expenses under the AOTC, but not the Lifetime Learning credit.
Those eligible will qualify for the maximum annual credit of $2,500 per student, $1,000 of which is refundable for the American Opportunity Tax Credit. That means if you owe nothing, you get it back. A taxpayer whose gross income is greater than $90K ($180K filing joint) cannot claim the credit.
The Lifetime Learning Credit is $2,000 per year per taxpayer, for any post-high school education (including graduate-level courses and courses to acquire or improve job skills) at an eligible educational institution. The Lifetime Learning credit is nonrefundable i.e. it can reduce regular income taxes to zero but can’t result in the receipt of a refund.
For the Lifetime Learning Credit, a taxpayer whose gross income is greater than $68K ($136K filing joint) cannot claim the credit.
Tax Forms
A taxpayer must receive a Form 1098-T payee statement from the educational institution. Your student can obtain this form by logging into their student portal. Keep in mind that the required books, supplies and equipment and the local fees will not be on the 1098-T statement so make certain you take that into account.
The Form 1098-T should be available online around January 24th, 2020 in paperless form and received by mail by January 31, 2020.
To retrieve the Form 1098-T follows these steps:
- Log into your student’s account
- Click on the Main Menu tab and then My Campus Finances
- Click on View 1098-T
Make sure you take your allowable credits and consult with a professional. You can click here for further clarification of the American Opportunity Tax Credit and here for further clarification of the Lifetime Learning Credit.
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