With the filing season here, students as well as their parents should study up on the new tax credit breaks that can help with the continuously rising cost of higher education. Why? The IRS is now reducing liability that students (or their parents) owe each year, provided the student is enrolled at least part time in a higher education program.
There are two specific credits for eligible taxpayers that go toward reducing education costs. The Lifetime Learning Credit can help lower the total taxes owed at the end of a tax year based on how much you earned during the year. As with any other credit available to taxpayers, there are guidelines and stipulations that come with such benefits. To qualify, the modified adjusted gross income (“MAGI”) is less than $68,000 for a single taxpayer, or $136,000 for joint filers. Regardless of whether your household consists of one student or five, the Lifetime Learning Credit comes with an annual cap of $2,000 in deductions.
The second higher education credit is the American Opportunity Tax Credit. To qualify, the student must pursue a degree from a recognized secondary education institution. A maximum of $2,500 is allotted per eligible student. Qualifying MAGI caps at $80,000 for single filers, and $180,000 for joint filers; the higher the income, the less the credit. Only the first four years of the eligible education or vocational school will be considered. Thus, master’s and doctoral programs are excluded.
To be eligible for either credit, you or your dependent must have received a Form 1098-T from an accredited educational institution. Should you have questions about either credit, are unsure if you qualify come tax season, or need assistance in claiming these credits on your 2019 tax return, contact the Law Offices of Christy Lee, P.C., and we’ll be more than happy to lend you a hand!