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Two education credits help taxpayers with college costs

Education Credit

With school back in session, parents and students should look into tax credits that can help with the cost of higher education. They do this by reducing the amount of tax someone owes on their tax return. If the credit reduces tax to less than zero, the taxpayer may get a refund.

Taxpayers who pay for higher education in 2019 can see these tax savings when they file their tax returns next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.

There are two credits available to help taxpayers offset the costs of higher education. The American opportunity tax credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

To be eligible to claim the American opportunity tax credit, or the lifetime learning credit, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution.

The American opportunity tax credit is:

  • Worth a maximum benefit up to $2,500 per eligible student.
  • Only for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.


The lifetime learning credit is:

  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

You may be able to save money with education tax credits

You may be able to save money with education tax credits If you’re paying education costs for yourself, a spouse or a dependent, you may be eligible to save some money with education tax credits.

Higher education costs paid in 2017 can mean tax savings in 2018. Here are some facts about key tax breaks for higher education.

The American Opportunity Tax Credit (AOTC) is:

• Worth a maximum benefit up to $2,500 per eligible student.

• Only for the first four years at an eligible educational or vocational school.

• For students pursuing a degree or other recognized education credential.

• Partially refundable. People can potentially get up to $1,000 back.

 

The Lifetime Learning Credit (LLC) is:

• Worth up to $2,000 per tax return, per year, no matter how many students qualify.

• Available for all years of postsecondary education and for courses to acquire or improve job skills.

• Available for an unlimited number of tax years.

To claim the AOTC or LLC, use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, if you claim the AOTC, the law requires you to include the school’s Employer Identification Number on this form.

Here are a few more facts to add to your notes:

• You’re required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. You receive this form from the school you attended. There are exceptions for some students.

• Eligible educational schools are those that offer education beyond high school. This includes most colleges and universities.

• You may only claim qualifying expenses in the year paid.

• You can’t claim either credit if someone else claims you as a dependent.

• You may need to reduce the amount of your credit based on the amount of income you receive.

• You can’t claim both the AOTC or LLC for the same student or for the same expense in the same year. • The Interactive Tax Assistant tool on IRS.gov can help you check for eligibility.

• See IRS Publication 970, Tax Benefits for Educa

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