What You Need to Know About Education Credits This Tax Season

BY PHILIP C. ROVENTINI CPA

There are two education credits (dollar for dollar reduction of tax) that are available to taxpayers who have qualified education expenses for themselves and for their dependents.

One is the American Opportunity Credit. This can be a credit of up to $2,500 per eligible student. It is available if the student had not completed the first four years of postsecondary education. In addition, the student must be pursuing a degree and be enrolled at least half time for at least one academic period beginning during the year.

Qualified education expenses include tuition, required enrollment fees, and course materials. For purposes of this credit, room and board are considered personal expenses and do not qualify. The limitation that most commonly disqualifies this credit is the Modified Adjusted Gross Income limit. The limit is $90,000 for single and head of household taxpayers and $180,000 for married taxpayers.

The second credit that is available is the Lifetime Learning Credit. This credit is up to $2,000 per return but has some different qualifications.

The Lifetime Learning Credit is more liberal in three major areas. One is that this credit is available for all years of postsecondary education and for courses to acquire or improve job skills. The second is that the student does not have to be pursuing a program leading to a degree. Thirdly, this credit is available for an unlimited number of years.

The major challenge with the Lifetime Learning Credit is that the Modified Adjusted Gross Income limit is lower than that of the American Opportunity Credit. The limit is $63,000 for single and head of household status and $127,000 for married filing jointly.

If you qualify, each of these credits should be considered when filing your tax returns. You can claim both credits on your return but not for the same student. To evaluate if you are a candidate for these two credits you should consult your tax advisor.

Philip C Roventini is president of Roventini CPA PC, a firm servicing professional practices since 1981 

This article was originally published in the Westchester Rockland Veterinary Medical Association Journal