Tag Archives: American Opportunity Tax Credit

IRS Tax Tip: Back-to-School Tips for Students and Parents Paying College Expenses

25 Tuesday Sep 2012

Posted by in College

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Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

  • American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.
  • Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.

You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

  • Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
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  • Education Tax Credits and Deductions – English
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IRS Tax Tip: Seven Tips to Help Taxpayers Avoid Phony Refund Schemes Abusing Popular College Tax Credit

05 Monday Mar 2012

Posted by in Tax Credits

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Seven Tips to Help Taxpayers Avoid Phony Refund Schemes Abusing Popular College Tax Credit

The Internal Revenue Service offers the following seven tips to help taxpayers avoid an emerging scheme tempting senior citizens and other taxpayers to file tax returns claiming fraudulent refunds.

These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement.

Promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

Con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.

A variation of this scheme also falsely claims the college credit is available to compensate people for paying taxes on groceries.

These schemes can be quite costly for victims. Promoters may charge exorbitant upfront fees to file these claims and are often long gone when victims discover they’ve been scammed.

Taxpayers should be careful of these scams because, regardless of who prepared their tax return, the taxpayer is legally responsible for the accuracy of their tax return and must repay any refunds received in error, plus any penalties and interest. They may even face criminal prosecution.

To avoid becoming ensnared in these schemes, the IRS says taxpayers should beware of any of the following:

  • Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
  • Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
  • Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
  • Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
  • Unsolicited offers to prepare a return and split the refund.
  • Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.

In recent weeks, the IRS has identified and stopped an upsurge of these bogus refund claims coming in from across the United States. The IRS is actively investigating the sources of this scheme, and its promoters can be subject to criminal prosecution.

To get the facts on tax benefits related to education, go the Tax Benefits for Education Information Center on this website.

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Education Tax Credits Help Pay Higher Education Costs

27 Monday Feb 2012

Posted by in Tax Credits

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The following is a tax tip from IRS:

Education Tax Credits Help Pay Higher Education Costs

Two federal tax credits may help you offset the costs of higher education for yourself or your dependents.  These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by either the parent or the student, but not both. If the student was claimed as a dependent, the student cannot file for the credit.

For each student, you may claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your spouse’s graduate school tuition.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit

  • The credit can be up to $2,500 per eligible student.
  • It is available for the first four years of postsecondary education.
  • Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
  • The student must be pursuing an undergraduate degree or other recognized educational credential.
  • The student must be enrolled at least half time for at least one academic period.
  • Qualified expenses include tuition and fees, coursed related books supplies and equipment.
  • The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $80,000 or $160,000 for married couples filing a joint return.

2. Lifetime Learning Credit

  • The credit can be up to $2,000 per eligible student.
  • It is available for all years of postsecondary education and for courses to acquire or improve job skills.
  • The maximum credited is limited to the amount of tax you must pay on your return.
  • The student does not need to be pursuing a degree or other recognized education credential.
  • Qualified expenses include tuition and fees, course related books, supplies and equipment.
  • The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $60,000 or $120,000 for married couples filing a joint return.

If you don’t qualify for these education credits, you may qualify for the tuition and fees deduction, which can reduce the amount of your income subject to tax by up to $4,000. However, you cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about these tax benefits, see IRS Publication 970, Tax Benefits for Education available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
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