The eligible student is yourself, your spouse or a dependent you list on your tax return.An eligible student must be enrolled at an eligible educational institution.You, your dependent or a third party pays qualified education expenses for higher education.There are additional rules for each credit, but you must meet all three of the following for either credit: There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit. If the credit reduces your tax to less than zero, you may get a refund. CreditsĪn education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. See IRS Publication 970, Tax Benefits for Education PDF for details on these benefits, including an appendix with an illustrated example and a comparison chart of the various benefits. An exclusion from income means that you won't have to pay income tax on the benefit you're receiving, but you also won't be able to use that same tax-free benefit for a deduction or credit. Certain savings plans allow the accumulated earnings to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.A tax credit reduces the amount of income tax you may have to pay.Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education. Review the AOTC and Publication 519, U.S. There are additional requirements for foreign students and dependents who have an ITIN.You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for educational credits or deductions, including the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC).
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