For people who want to pursue their education, the Internal Revenue Service assists with the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). These will help offset your costs of education.
Under the AOTC, an eligible student can be qualified for a maximum annual credit of $2500. The credit will cover only qualified education expenses. If the credit brings the amount of the tax a person owes to zero, forty percent of the remaining amount from the credit will be refunded to the person. The refund can amount to as much as $1,000.
To be eligible under the AOTC, the student must be pursuing a degree or other recognized education credential, be enrolled at least half time for at least one academic period beginning in the tax year, not have finished the first four years of higher education at the beginning of the tax year, not have claimed the AOTC or the former Hope credit for more than four tax years, and not have a felony drug conviction at the end of the tax year.
Be sure that you have a valid taxpayer identification number (TIN) when claiming the AOTC. The TIN may be a Social Security number, an individual taxpayer identification number (ITIN), or an adoption taxpayer identification number (ATIN). Further, you can only claim the full credit under the AOTC if your modified adjusted gross income (MAGI) is $80,000 or less.
If you are married or filing jointly, the MAGI must be $160,000 or less. You will receive a reduced amount of the credit if your MAGI exceeds $80,000 but less than $90,000, or over $160,000 but less than $180,000 for married or filing jointly.
For the LLC, a person is qualified for tuition and related expenses paid for eligible students enrolled in an eligible educational institution and help pay for undergraduate, graduate, and professional degree courses, including courses that will help the student acquire or improve job skills. The claim can amount to as much as $2,000 per tax return and there is no limit on the number of years such can be claimed.
To claim the LLC, you, your dependent, or a third party must pay qualified education expenses for higher education; you. your dependent or a third party must pay the education expenses for an eligible student enrolled at an eligible educational institution; and the eligible student is yourself, your spouse, or a dependent you listed on your tax return.
To be an eligible student, one must be enrolled or taking courses at an eligible educational institution, be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills, and be enrolled for at least one academic period beginning in the tax year.
Know that the credit you can claim will be gradually reduced if the MAGI is between $59,000 and $69,000 or $118,000 and $138,000 if you file a joint return and you cannot claim the credit under LLC if the MAGI is $69,000 or more $138,000 or more if you file a joint return.
If the student is eligible under the AOTC or the LLC, they must receive Form 1098-T Tuition Statement from an eligible educational institution, whether domestic or foreign. The eligible student must complete Form 8863 found here: https://www.irs.gov/pub/irs-pdf/f8863.pdf. After filling it in, it must be attached to the eligible student’s tax return under AOTC. Under LLC, it must be attached to Form 1040 or Form 1040-SR.
