College Tax Credits

What does the U.S. tax code say about college tax credits? 26 U.S. Code § 25A.American Opportunity and Lifetime Learning credits

The code says, there are two credits that shall be allowed against the tax imposed by this chapter for the taxable year the amount equal to the sum of —
(1)the American Opportunity Tax Credit, plus
(2)the Lifetime Learning Credit.

What student is considered eligible per the IRC?

Eligible student:
Eligible student For purposes of this subsection, the term “eligible student” means, with respect to any academic period, a student who —

• (A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 ( 20 U.S.C. 1091(a)(1) ), as in effect on the date of the enactment of this section,
• and (B) is carrying at least ½ the normal full-time workload for the course of study the student is pursuing.

What form to use to claim the credit?

Use Form 8863, Education Credits, to claim either of the credits. You CAN NOT claim both.

A taxpayer or a dependent will probably receive Form 1098-T from an eligible educational institution (exceptions apply).

How much is the credit?

American Opportunity Credit:

• up to $2,500 per eligible student
• only eligible to claim for the first four years at an eligible college
• only eligible if a student is working towards a degree
• partially refundable

The Lifetime Learning Credit is:

• up to $2,000 per tax return, per year
• postsecondary education and for courses to acquire or improve job skills.
• an unlimited number of tax years

Does it need to be adjusted for scholarships, etc?

• Per IRC, the amount of qualified tuition and related expenses shall be reduced by the sum of any amounts paid for the benefit of such individual which are allocable to such period as —
  (A)a qualified scholarship
• (B)an educational assistance allowance
• ©a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual’s educational expenses, or attributable to such individual’s enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States (26 U.S. Code § 25A.American Opportunity and Lifetime Learning credits).

What filing status prevents you from being eligible?

• married individuals filing separate returns
• nonresident aliens

Contact for more info: (888) 78MyTax