If someone in your household is going to college, you may be able to get a refund on your next tax return. Here is some helpful information about education tax credits.
The American Opportunity Tax Credit is worth up to $2,500 annually for a qualified student. You can use this credit for the first four years of higher education only. Forty percent of the American Opportunity Tax Credit is refundable, and if you are qualified, you may receive up to $1,000 of the credit as a refund.
Lifetime Learning Credit (LLC) is a worth up to $2,000 that can be claimed on your income tax return and is not limited to a specific number of years.
There can only be one kind of educational credit claim per student on your taxes per year. When you have more than one student qualifying for an educational credit in a single calendar year, you can use different credits for each student.
Qualified expenses are used to calculate your credit including tuition, fees, and other expenses. The student must attend an eligible school (which can be found at the accreditation database) in order for the deduction to be valid.
The student will receive a tuition statement, Form 1098-T, from their school by February 1st listing all qualified expenses paid to the institution. The amounts on the form might be different than how much was actually paid because some of the educational costs might not appear on the form. For example, the price of textbooks and additional school expenses may not be listed. Nonetheless, these costs may still be able to be included when the credit is determined. Just remember that education credits can only be used for the qualified expenses that are paid in that same tax year.
If the student is in the USA and came with a F-1 Student Visa, the tax rules usually apply to them as a non-resident alien for federal taxation purposes. For more information on F-1 Student Visa status visit U.S. Immigration Support. If you have questions regarding the limitations for non-resident aliens and tax credits, please review Publication 519, U.S. Tax Guide for Aliens, for guidance. The educational credits have limitations and can be decreased or removed depending on the income level of the tax filer(s).
For more information on this topic visit IRS.gov/EducationCredits or contact your tax preparer to determine how these credits apply to your situation.
