College is expensive. We get it. Luckily, if you’re a taxpayer who paid for college expenses this year, you might qualify for an education tax credit. The IRS recently suggested that parents take stock of their situation and see if they qualify for the Lifetime Learning Credit or the American Opportunity Tax Credit. Not sure about what that entails or how to claim them? Here’s an overview:
Lifetime Learning Credit (LLC)
The LLC is a nonrefundable education credit for taxpayers who meet certain requirements. (Wondering if you’re eligible? Stay tuned.) Here are a couple facts you need to know about the LLC:
American Opportunity Tax Credit (AOTC)
While the LLC applies to each tax return, the AOTC is an education credit that applies to each eligible student. Here are some quick facts about the AOTC:
You qualify for either tax credit if your qualified expenses are paid for an eligible student. Who’s an eligible student? You (the taxpayer), your spouse or your dependents. Whoever the eligible student is, they must be enrolled in a qualifying university, college or vocational school. Both for-profit and non-profit institutions count.
The easiest way to determine whether or not you’re eligible is to visit the IRS webpage, “Am I Eligible to Claim an Education Credit?”, and use their interactive assistance tool.
Now, the good part: claiming the credit and getting a tax break for all that money you’ve spent on higher education. To claim either of the tax credits on your federal income tax return, you must file Form 8863.
But wait, there’s more! The Lifetime Learning Credit and the American Opportunity Tax Credit aren’t the only tax benefits for higher education. You can read more about what’s available in Publication 970.
Figuring out your taxes can be a difficult – and annoying – task, but don’t throw away money because of a little added stress. Our team of Money Coaches includes College Planning Specialists and Tax Specialists who can help you decipher which credit is most beneficial to your situation. You could even take it one step further and ask your Money Coach about our referrals for Tax Preparation Services and member discounts. Call today for more information.
Information provided in this article is for informational purposes only and is not intended to offer specific personalized investment, financial planning, tax or accounting advice. We recommend that you consult an attorney, tax advisor or accountant regarding your unique financial goals and circumstances.
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