You’re not the only one wondering what is education tax credit? There are many students who are confused about this topic and want to know the same things. Rightfully so, because education tax credits can really benefit you by lowering your overall tax obligation and educational expenses.
By reducing the amount of tax owed on your tax return, an education credit helps with the rising costs of higher education. If a credit results in reducing your taxes to less than a zero amount, then you may receive a refund. There are two education credits available: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
Who can claim education tax credit?
There are additional rules for each credit, but you will need to meet these 3 factors in order to qualify for either education credit:
- Either yourself, your dependent(s) or a 3rd party is paying qualified education expenses for a higher education.
- To be considered an eligible student, it is required that the student is enrolled at an educational institution that is eligible.
- That eligible student may be yourself, a dependent that you have listed on your tax return, or your spouse.
If you’re eligible to claim both the lifetime learning credit as well as the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both.
If you were a non-resident alien for any length of the tax year – unless you elect to be treated as a resident alien for federal tax purposes, you cannot claim the AOTC. For more information about AOTC and foreign students, visit American Opportunity Tax Credit – Information for Foreign Students.
In order to claim the AOTC, the tax law does require that you and your qualifying student both have a valid Social Security Number or an Individual Taxpayer Identification Number that was issued before your tax return due date.
What are qualified educational expenses?
Qualified education expenses are expenses that were paid for tuition, fees and any other related amounts for a student that is eligible. These expenses had to be either paid by you (or your spouse if filing jointly), a student that you claimed as a dependent on your tax return, or a 3rd party which includes relatives or friends.
More details concerning qualified educational expenses.
What is an eligible educational institution?
An educational institution that is recognized as eligible is a school that offers higher education beyond highschool. It is deemed as any university, college, vocational or other post secondary educational institution that is eligible to be a participant in a student aid program that is operated by the U.S. Department of Education. The simplest thing to do to find out if your school is eligible is to just ask your school.
More details concerning eligible educational institutions.
Education tax credits such as the American opportunity tax credit and the lifetime learning credit can be a great help to lessen the burden of educational expenses and lower the amount of taxes you may be required to pay. This is an area that you definitely need to take proactive step to check into. These credits will not be awarded to you if you don’t claim it. GET YOURS!
It is advisable to get all the qualified consultation that you can to learn more about what is education tax credit. Consult with your school, accountant, tax professional or professional tax software assistant for more details on how does education tax credit work and if you you qualify. Also reference IRS Publication 970 – Tax Benefits for Education for 2015 tax returns.
All the best in your education. Happy Learning & Earning $-)