You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution.
What’s Considered an Eligible Educational Institution?
In order to qualify for either credit, the educational institution must meet the IRS criteria. According to the IRS, an eligible educational institution would be any that would qualify for a Pell Grant. You can find out if your school is on the qualified list at the U.S. Department of Education’s website.
American Opportunity Credit
The American Opportunity Credit benefits the student pursuing a degree or other recognized education credential on at least a half time basis. It’s available for the first 4 years of one’s postsecondary education. This credit can be claimed only for the first 4 tax years for each eligible student (including any year(s) the Hope credit was claimed).
Ideal for someone who is:
- Pursuing a degree or other recognized education credential
- Enrolled half time or greater
- Claiming the credit for the first 4 years of one’s postsecondary education
Qualified expenses include:
- Required enrollment fees
- Course materials (whether or not purchased at the educational institution as a condition of enrollment or attendance)
Lifetime Learning Credit
The Lifetime Learning Credit benefits those who are taking any postsecondary education, and for those who are taking courses to acquire or improve their job skills. The student is not required to be pursuing a degree or other recognized education credential. The required minimum enrollment is one course, making it highly suitable for busy work and family schedules. And, unlike the American Opportunity Credit’s 4-year cut-off, the Lifetime Learning Credit is claimable for an unlimited number of years.
Ideal for those:
- Pursuing any postsecondary education or job improvement skills
- Enrolled in as few as one course
- Claiming the credit for an unlimited number of years of one’s postsecondary education
Qualified expenses include:
- Required enrollment fees (including amounts required to be paid to the institution for course-related books, supplies, and equipment)
- You can only claim one credit each per eligible student per year.
- The credits are based on the amount of qualified education expenses paid for the student in 2012 for academic periods beginning in 2012 and in the first 3 months of 2013.
Remember: Keep all documentation and receipts as proof of enrollment.
Education credits are claimed on Form 8863, Education Credits (Hope and Lifetime Learning Credits). For details on these and other education-related tax breaks, see IRS Publication 970, Tax Benefits of Education and the IRS Instructions for Form 8863.
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