College Tax Credits 2014
by Cody Taylor
There is often confusion surrounding who can claim college tax credits and for how much. The two college tax credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. You can only claim one of these credits per student on your federal tax return. The American Opportunity Tax Credit is worth up to $2,500 per qualifying student for up to four years and is currently available through 2017.
Everyone wants to be able to claim a college tax credit but there are various rules, income limitations and exclusions that apply for each credit. The source of the money used to pay for qualified tuition expenses matters in determining whether you can qualify for one of the college tax credits. For example, 529 college savings plans are utilized by many taxpayers to plan for college expenses, but expenses that were used to calculate the tax-free portion of a distribution from a 529 plan may not also be used to calculate the American Opportunity Tax Credit. There are ways to claim the AOTC in the same year as a tax-free distribution from a 529 plan is made, but it takes planning.
You should receive a Form 1098-T from your school in the mail. This and other related costs (often textbooks) should be supplied to your tax professional along with your other tax information so that they can help adopt the best college tax credits for your particular situation. Proper planning ahead of time can save you money in the long run. A tax professional can help you discuss college tuition planning so that when the time comes for you or your child to go off to college, you will be able to claim the maximum credit allowable to you.
Langdon & Company LLP has a tax department full of experience to help you make the right choice for this deduction. Please feel free to contact our office for more information.
Cody Taylor ([email protected]) is a tax staff who specializes in various issues related to individuals and their businesses.