Phoenix Taxes | Education Credits
If you paid for college in 2015, it could mean substantial savings on you federal income tax return. There are two education credits that can alleviate some of the burden of higher education expenses. These credits may reduce the amount of income tax you owe on your income tax return or could lead to refunds in some cases. Here are some important pieces of information you should know about the education credits.
The first and most beneficial credit is the American Opportunity Tax Credit.
- You may be eligible for a combined credit of up to $2500 per eligible student.
- This credit only applies to the first 4 years at an eligible educational institution.
- It can reduce your income tax to $0. If you reduce your income tax liability to $0, up to $1000 may be refundable.
- It is only available for students earning a degree or other recognized credential.
- Students must be attending at least half-time for at least one academic period that started during the tax year.
- The cost of tuition books, and required fees and supplies may be included in calculation of your education costs.
The other credit is the Lifetime Learning Credit.
- You may be eligible for up to $2000 per tax return, per year.
- This credit applies to all years of higher education. This includes classes that improve job skills or are just for learning.
- This credit is non-refundable, meaning it can reduce your tax liability to $0, but cannot be refunded.
- The cost of tuition, books, fees, supplies you must buy from the school are all includable in your total education costs.
The following information pertains to both credits.
- These credits apply to eligible students. An eligible student can be yourself, spouse or a dependent you claim on your tax return.
- You must include a form 88633, with your tax return to claim these credits.
- You cannot claim the credit if you are claimed by someone else on their tax return.
- You cannot claim both credits for the same student or for the same expense, in the same year.
- There are income limits that my limit your tax benefit from these credits.
If you have questions, feel free to contact us at Dusseau & Makris, PC, your Phoenix CPA firm.