Tuition and Taxes
Tuition Tax Break Refresher – Tax Credit opportunities you should not miss!
The obvious: College is expensive. Last school year, private colleges averaged over $31,000 with many topping $50,000 per year. But there is some relief available from a tax perspective.
School Tax Credits
If you, your spouse or a dependent is already in or is heading off to college, there are several important facts you should know about education tax credits. The American Opportunity Tax Credit can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means the taxpayer may be able to get up to $1,000 of the credit as a refund, even if they don’t owe any taxes. With the Lifetime Learning Credit, they may be able to claim a tax credit of up to $2,000 on their federal tax return. There is no limit on the number of years this credit can be claimed for an eligible student. You can claim only one type of education credit per student on their federal tax return each year. If more than one student in a family qualifies for a credit in the same year, taxpayers can claim a different credit for each student. For example, you can claim the AOTC for one student and claim the LLC for the other student. You may include qualified expenses to figure your credit. This may include amounts paid for tuition, fees and other related expenses for an eligible student. In most cases, taxpayers should receive Form 1098-T, Tuition Statement, from the school. This form reports qualified expenses to the IRS and to the taxpayer.
For more information or questions please contact:
Robert Housman, Esq. at 310-276-3550 or rhousmanlaw@gmail.com
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