If you paid for higher education in 2016, you may be eligible for an education tax benefit. We’ve put together the facts on what’s currently available below. As always, speak with your tax advisor for full details and to determine if you’re eligible. You can also review IRS Publication 970, which provides specifics on tax benefits for education.
The American Opportunity Tax Credit provides a partial refund for qualified tuition, fees, and course materials paid toward the first four years of post-secondary education. It matches up to 100% of the first $2,000 paid for these costs, plus 25% of the next $2,000 spent for these costs. And you can claim this amount for each eligible student. The maximum credit is $2,500, and 40% of it is refundable (meaning only 40% can be used to increase your tax refund). The AOTC is not available for individuals with a modified AGI equal to or above $90,000 nor for married couples filing together with a modified AGI equal to or above $180,000. The AOTC is not available for individuals with a married filing separately tax status.
The Lifetime Learning Credit is a tax credit equal to 20% of the first $10,000 spent on qualified education expenses for post-secondary education, up to a maximum of $2,000. The credit is limited to individuals with a modified AGI of less than $65,000 (less than $131,000 for married couples filing jointly) and is non-refundable (so you won’t receive the credit as a refund but it can lower the amount of tax you owe). The LLC is not available for individuals with a married filing separately tax status.
The Tuition and Fees Deduction allows a taxpayer to reduce his or her taxable income by up to $4,000 based on the amount paid for tuition and fees required for enrollment or attendance at any eligible post-secondary educational institution. Only individuals with a modified AGI of $80,000 or less (and married couples filing jointly with a modified AGI of $130,000 or less) may take this deduction.
You are eligible to claim all three of the benefits above on one tax return, but not for the same student or the same expenses. For more information on tax benefits for education, visit the IRS website. And for any questions related to college planning and financial aid, contact us here at MEFA at (800) 449-MEFA (6332) or firstname.lastname@example.org.