Tax Credits for Higher and Continuing Education
Higher education can be expensive. Luckily, taxpayers, whether it's the student or someone claiming the student on their tax return, may be able to claim a credit for qualified education expenses.
The two credits available to students are the American Opportunity Tax Credit and the Lifetime Learning Credit, however, you can only claim one in a given tax year.
American Opportunity Tax Credit (AOTC)
The AOTC is available for those you typically think of as the "traditional" college student. To be eligible, a student must be enrolled at least half-time for at least one academic period and in their first four years of pursuing a college degree, certificate, or other recognized educational credential.
If the taxpayer's modified adjusted gross income (MAGI) is more than $90,000 as a single filer or $180,000 as married filing jointly, they are not able to claim the credit. The full credit is worth up to $2,500 per student, with 40% of it being refundable.
Eligible expenses include tuition, required enrollment fees, and course materials needed for a course of study purchased at the educational institution or elsewhere.
If you don't meet all of the requirements for the AOTC, you may still be eligible for the Lifetime Learning Credit.
Lifetime Learning Credit (LLC)
The eligibility for the Lifetime Learning Credit is more relaxed than the AOTC. This credit is available for students enrolled in post-secondary education and courses to acquire or improve job skills. This credit can be claimed even if the student is only taking one course and they do not need to be pursuing a degree, certificate, or other recognized education credential. It is not limited to the first four years of post-secondary education and you may claim this credit an unlimited number of times.
The credit is worth up to 20% of the first $10,000 of qualified education expenses, with the maximum credit amount being up to $2,000 per return. The credit amount is gradually phased out depending on income and has an upper limit of $69,000 for single filers and $138,000 for married filing jointly. It is a non-refundable credit so you will not receive a refund for any excess amount. Even if you claim more than one student on your tax return, the maximum credit is worth $2,000 in total.
Eligible expenses include tuition, required enrollment fees, required course-related books, supplies, and equipment paid to the institution
Claiming Education Credits
If you are eligible for either of these credits, you can use Form 8863, Education Credits, to claim it on your tax return.
Need help filing? Our tax preparers here at Northside Tax Service can help you claim all the credits and deductions you deserve! Give us a call at (360) 922-0235 or contact us here.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or view the resources below to see how this information may apply to you.
