Back-to-School Education Tax Credits

Education Credit

If you, your spouse or your children are heading off to college in this fall, some of your expenses that you pay for college may save you some money at tax time next year. You may be able to claim an education tax credit on your federal tax return. Below are some key tips that you should know about the tax credits:

•  American Opportunity Tax Credit.  This credit is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of college education. Forty percent of this credit is refundable. That means if you are eligible, you can receive up to $1,000 of the tax credit as a refund, even if you do not have any tax liabilities.
• Lifetime Learning Credit.  This credit is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim on this Credit for yourself or for an eligible student.
• One credit per student.  You can claim only one type of education credit per student on your tax return each year. If you have more than one student qualifies for an education credit in the same year, you can claim a different credit for each student. For instance, you can claim the American Opportunity Credit for one student, and claim the Lifetime Learning Credit for the other.
• Qualified expenses.  You may use qualified expenses to figure your education tax credit. These include the costs that you pay for school tuition, books, fees and other education related expenses either for yourself or for an eligible student 
• Eligible educational institutions.  Eligible schools usually are those that offer continuing education beyond the level of high school. This includes most colleges and universities. Vocational schools or other post-secondary schools may also qualify. 
• Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school by February 1, 2016. This form reports your qualified expenses to both the IRS and to you. The amounts shown on the form sometimes may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your school textbooks may not appear on the form. However, you still may be able to include those costs when you figure your education credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
• Income limits. These two education credits are subject to income limitations.  They may be reduced or even eliminated completely based on your income level. 

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Source:  www.irs.gov.
Email:   Excellent-tax@gmx.com