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College Tax Credits

Thursday, October 15, 2015
As the school year begins, the IRS wants to remind all parents that now is the perfect time to find out if they are eligible for tax benefits in the form of two college tax credits for their 2015 federal tax returns. Taxpayers with student eligible costs may be able to qualify for the Lifetime Learning Credit (maximum credit for each return) or the American Opportunity Tax Credit (credit for each student).  Any student enrolled in an eligible educational institution (college or vocational school) can claim the tax credit and the taxpayer is able to qualify for both; however only one of the credits can be claimed for a student in that year.  In order to claim a tax credit, you will need to file your taxes and complete an Education Credit Form (8863).  There are income limits that taxpayers will have to take into consideration.

There is an interactive tool available on the IRS website that will help taxpayers determine if they are eligible for either of the tax credits.  In general, students will receive a 1098 Form in the mail from their school that will be due February 1, 2016.  There are forms and instructions that explain how to figure out your allowable benefits and will inform you about the tuition payment status.

If a student is eligible for the American Opportunity Tax Credit they could receive a tax credit of up to $2,500 which they can use for expenses during the entire year for up to four tax years. The expenses include fees such as tuition, books, and other expenses; however, housing is not qualified. Taxpayers can claim the credit if their income is $80,000 or under for single or $160,000 for married couples. If the earnings are above this amount then they are not eligible for a tax credit.

If an undergraduate or graduate student is eligible for the Lifetime Learning Credit, they could receive a maximum of $2,000 per tax return.  If a taxpayer does not owe taxes, they cannot earn a tax credit. The tax credit can be used for fees such as tuition. Taxpayers can claim the credit if their income is $55,000 or under for single or $110,000 for married couples.  Taxpayers who earn more than $130,000.
Good news for parents – they can receive the credit by having less taxes take out of their pay by filing a new W-4 Form in order to increase the withholding allowance.  Also, don’t forget that if you have a child who is a student, you can claim them as a dependent until age 24.

Need assistance with the Education Credit Form Los Angeles Tax Attorneys who specialize in the tax code and we can assist you with your tax-related issues with the IRS.  We are professional business tax lawyers with years of experience in tax-related and IRS issues.  Call the Strategic Tax Lawyers at (800) 669-4775 for a free consultation to assist you with your tax-related matters.