The Internal Revenue Service reminded Keystone State parents and students that now is a good time to check eligibility for either of two education tax credits for their 2015 federal income tax returns.
Generally, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The AOTC provides a credit for each eligible student, while the LLC provides a maximum credit per tax return.
In tax year 2013, more than 379,000 Pennsylvania taxpayers claimed the AOTC, worth more than $367.6 million on their taxes. More than 400,500 Pennsylvania taxpayers claimed the LLC, resulting in more than $487 million in tax savings.
Nationally, 10.2 million taxpayers claimed the AOTC while 10 million claimed the LLC in 2013. Both credits combined helped taxpayers offset higher education costs by $19.6 billion.
Other key points:
· Although some may qualify for both credits, only one credit may be claimed per student per year.
· File IRS Form 1040 or 1040A and complete Form 8863, Education Credits, to claim either credit.
· The AOTC and LLC apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions.
· The credits are subject to income limits that could reduce the allowable amount claimed.
“Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student for the cost of tuition, fees and course materials paid during the tax year,” said Jennifer Jenkins, IRS spokesperson for Pennsylvania. “Up to $1,000 is refundable, so you may qualify for the credit even if you owe no tax.”
The LLC of up to $2,000 per tax return is generally available for both qualifying graduate and undergraduate expenses. Unlike the AOTC, the limit on the LLC applies to each tax return, rather than to each student. The LLC does not provide a benefit to people who owe no tax.
The IRS reminds students to use the IRS Data Retrieval Tool on the Free Application for Federal Student Aid website to import tax return information to their financial aid application. The temporary shutdown of the Get Transcript tool does not affect FAFSA’s IRS Data Retrieval Tool. Applicants may click on FAFSA’s help page for information.
For details on all of the tax benefits for education, visit the Education Credits Web page or use the IRS’ Interactive Tax Assistant tool. Both are available on IRS.gov.