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Tag Archives: Form 1098-T

College Tax Credits 2014

Pam Williams0 Comment

by Cody Taylor

college-debtThere 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.

The Scoop on Educational Tax Credits

Pam Williams0 Comment

by Taylor Elliott

booksThere are several educational tax credits and deductions available, but how and when do they apply? The IRS recently published the article “IRS Summertime Tax Tip 2014-23” to help taxpayers understand the tax benefits that are available when educational expenses have been incurred during the year. The following excerpt from that article outlines some key factors:

  • American Opportunity Tax Credit.  The AOTC can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means that you may be able to get up to $1,000 of the credit as a refund, even if you don’t owe any taxes.
  • Lifetime Learning Credit.  With the LLC, you may be able to claim a tax credit of up to $2,000 on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
  • One credit per student.  You can claim only one type of education credit per student on your federal tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student.  For example, you can claim the AOTC for one student and claim the LLC for the other student.
  • Qualified expenses.  You may include qualified expenses to figure your credit.  This may include amounts you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more about the additional rules that apply to each credit.
  • Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.
  • Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school. This form reports your qualified expenses to the IRS and to you. You may notice that the amount shown on the form is different than the amount you actually paid. That’s because some of your related costs may not appear on Form 1098-T. For example, the cost of your textbooks may not appear on the form, but you still may be able to claim your textbook costs as part of the credit. Remember, you can only claim an education credit for the qualified expenses that you paid in that same tax year.

The article also points out that income limitations as well as residence status must be considered. If you, a family member, or dependent has recently started college or gone back to school, please contact our office so that our dedicated tax professionals can help you navigate your particular facts and circumstances to determine what educational benefits are best for you.

Taylor Elliott is a tax manager with Langdon & Company LLP. She specializes in tax compliance and planning.