If you or your dependents are attending college this fall,
you may be eligible for some help from the government in the form of a tax
credit. Discussed below are the American
Opportunity Tax Credit and the more limited Lifetime Learning Credit which are
available for qualifying taxpayers who pay tuition and other college expenses
for themselves or their dependents. Also
ask your CPA about a deduction for student loan interest paid during the year. In addition, many states (including New York)
offer college tuition credits or deduction from income, as well as tax
deductions for contributions to qualified 529 plans.
The American Opportunity Tax Credit
The American Opportunity Tax Credit can be used for multiple
eligible students each year, and can be worth up to $2,500 per student. A portion of the credit is refundable,
meaning that even if you owe no tax, you may receive up to $1,000 for each
eligible student for whom you submit the credit. The credit can be claimed for 4 tax years per
undergraduate student, as long as the student has not completed the first 4 years
of postsecondary education, and the student must be enrolled at least half-time
for a minimum of one academic semester for the year.
The American Opportunity Tax Credit includes the following
as qualified education expenses; tuition, fees, books, supplies and required
course materials. You can pay for these
expenses using cash, credit card or loan proceeds. Amounts paid for room and board, insurance or
student health fees do not qualify.
The American Opportunity Tax Credit is completely phased out
for single and head of household filers with modified adjusted gross income (MAGI)
over $90,000, and for married taxpayers filing jointly with MAGI over
$180,000. You cannot take the credit if
you are married and file separately.
The Lifetime Learning Credit
The Lifetime Learning Credit is limited to a maximum of
$2,000 per tax return regardless of how many eligible students qualify for it. It is
not refundable, so you will receive no benefit for it if you have no tax
liability. The credit is available for
any post-secondary degree classes or courses taken to improve job skills.
The Lifetime Learning Credit includes only tuition and
required course fees in the calculation of the credit. Books and supplies do not apply.
The Lifetime Learning Credit is completely phased out for
single and head of household filers with modified adjusted gross income (MAGI) over
$64,000, and for married taxpayers filing jointly with MAGI over $128,000. You cannot take the credit if you are married
and file separately.
Honorine M. Campisi, CPA
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