Information courtesy of IRS

If you, your spouse or a dependent are heading off to college in the fall, you may be able to claim a tax credit on your federal tax return. Here are some IRS tips about e tax credits.

  • American Opportunity Tax Credit. The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit.  This is worth up to $2,000 on your tax return, with no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student. You can claim one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student (ie: claim the AOTC for one student, and claim the LLC for the other).
  • Qualified expenses. You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student.
  • Eligible educational institutions. Eligible schools are those that offer education beyond high school, this includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.
  • Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form 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 textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Give us a call for further explanation relating to these credits.