Am I Eligible For Education Credits From The IRS?

Are you still paying for your college loans? If so, you already know how hard it can be to balance your monthly payments with everything else you need to cover each month.

But this tax season, the IRS has a handful of education tax credits to help you cut costs on higher learning, minimize your final tax bill, and boost your refund.

Let’s dive into which credits you might be eligible for and how to take advantage of them this year!

What Education Tax Credits Might You Be Eligible For?

The IRS has a few credits to support students and families dealing with the financial burden of higher education. Here’s a quick overview of what each one has to offer:

The American Opportunity Tax Credit (AOTC)

The AOTC is one of the two main credits you could qualify for. It could give you up to $2,500 off your tuition costs and might even add up to $1,000 to your refund if it’s more than what you owe in taxes.

Targeted toward undergraduate students, you need to pursue a degree or educational credential and be enrolled at least half-time for at least one academic period during the tax year.

While there are some restrictions, the AOTC’s broad coverage of expenses, including tuition, makes it worth investigating.

The Lifetime Learning Credit (LLC)

The LLC offers you a chance to get up to $2,000 per tax return each year. Given its flexibility, it’s a broader option for anyone enrolled in a degree program or taking courses to boost their job skills.

While the LLC isn’t refundable and income restrictions still apply, everyone can pursue more education while saving on taxes.

Other Education-Related Tax Benefits

In addition to the AOTC and LLC, other benefits like the student loan interest deduction and 529 plans give you more chances to save on taxes related to education.

These options don’t offer direct credits. Still, they will give you ways to reduce the interest paid on student loans or invest in education with tax advantages.

Who’s Eligible For These Credits?

The AOTC and LLC each have their own requirements. Here’s what you need to qualify for each one:

AOTC Requirements

  • Be pursuing a degree or similar educational qualification
  • Taking courses half time or more for part of the year
  • Be in your first four years of higher education as of this year’s start
  • Not have used the AOTC or the former Hope credit more than four times
  • Not have any felony drug charges by year’s end

LLC Requirements

  • You, your dependent, or another person needs to be covering your expenses
  • These expenses need to cover someone in higher education at a qualified school.
  • This student can be you, your partner, or someone you claim as a dependent on your taxes.

Remember that these credits can’t be double-dipped, so you can only choose one. For example, let’s say a parent is helping their children pay for college. If the dependent student already claimed one of these tax credits, the parent won’t be allowed to claim it again.

Always do your research and proper tax planning to understand the best option for you.

How To Claim Education Tax Credits

If you qualify, you’ll need to complete Form 1098-T from your institution detailing the amount of qualified education expenses paid. Then, fill out Form 8863 and attach it to your tax return.

Accurately reporting your education expenses and understanding the eligible costs ensures you make the most of these credits.

The Bottom Line

The AOTC and LLC are two incredible opportunities for anyone still paying for their education.

With careful planning and professional advice from a tax advisor, you can take advantage of these opportunities to support your educational journey and reduce your final tax burden!

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