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Tax time is Always Right Around the Corner!
Taxes, we have to admit, are not fun but necessary. As you are preparing your return or having a CPA prepare your return, do not forget to take advantage of the Education Tax Credits available which can help offset the cost of your student’s education.
Two Credits Available
There are two tax credits available to take, The American Opportunity Tax Credit and Lifetime Learning Credit. The AOTC (American Opportunity Tax Credit) was made permanent by the Protecting Americans from Tax Hikes Act signed in 2015. It now includes required course materials (think books, supplies, equipment) in addition to tuition and required fees (local, technology – you know, all those fees not included in tuition). The AOTC allows credit to be claimed for four post-secondary education years instead of two.
Those eligible will qualify for the maximum annual credit of $2,500 per student for which $1,000 is refundable for the American Opportunity Tax Credit. That means if you owe nothing, you get it back. A taxpayer whose gross income is greater than $90K ($180K filing joint) cannot claim the credit.
The Lifetime Learning Credit is $2,000 per year per taxpayer, for any post-high school education (including graduate-level courses and courses to acquire or improve job skills) at an eligible educational institution. The Lifetime Learning credit is nonrefundable-i.e., it can reduce regular income taxes to zero but can’t result in the receipt of a refund.
For the Lifetime Learning Credit, a taxpayer whose gross income is greater than $57K ($114K filing joint) cannot claim the credit.
A taxpayer must receive a Form 1098-T payee statement from the educational institution. Your student can obtain this form by logging into their student portal. Keep in mind that the required books, supplies and equipment and the local fees will not be on the 1098-T statement so make certain you take that into account.
The Form 1098-T should be available online around January 24th, 2020 in paperless form and received by mail by January 31, 2020.
To retrieve the Form 1098-T follows these steps:
- Log into your student’s account
- Click on the Main Menu tab and then My Campus Finances
- Click on View 1098-T
Make sure you take your allowable credits and consult with a professional or click here for further clarification for the American Opportunity Tax Credit and click here for further clarification for the Lifetime Learning Credit.