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Education tax credits eligibility and benefits explained

Posted on February 24, 2020

If you have a new college student in your household, there are two education credits that can help you with higher education costs:

  • American Opportunity tax credit and
  • The Lifetime Learning credit

Here are some answers to Frequently Asked Questions about the two college tax credits from the CPAs at Teipen Selanders Poynter & Ayres:

  • Taxpayers can claim both credits on the same return, but not for the same student or for the same qualified expenses.
  • Parents must be U.S. citizens to gain both/either credits.
  • The American Opportunity tax credit provides up to $2,500 credit per eligible student
 and is refundable for up to 40 percent of the credit.
  • The American Opportunity tax credit is available for four tax years per eligible student

  • The Lifetime Learning credit offers up to $2,000 credit per tax return and is not refundable
  • Just as its name implies, the Lifetime Learning credit is available for an unlimited number of tax years.
  • If parents are married but filing separately, they cannot both receive the credits. If parents of college-aged children are divorced, they should consult with a CPA and their attorney to make sure they are within their rights to claim the adjustments, as the adjustment can only be claimed on one tax return per child.

What are the limits on maximum adjusted gross income for these filing statuses?

  • American Opportunity credit: Married filing joint: $180,000; Other statuses: $90,000
  • 
Lifetime Learning credit: Married filing joint: $136,000; Other statuses: $68,000

What type of program is required?

In order to utilize the American Opportunity credit, a student must be pursuing a degree or other recognized education credential. The student must be enrolled at least half-time for at least one academic period during 2019. The credit may be used to cover tuition, enrollment fees, and/or course materials.

To utilize the 
Lifetime Learning credit, the student doesn’t need to be pursuing a degree. The credit can be used for any recognized education program(s) at any time, and may go toward tuition and reeds required for enrollment and attendance.

Who can claim the credit? 
The taxpayer, their spouse, or a student they claim as a dependent on their tax return may claim both/either credit.

If you have multiple dependents in college, some minors and others filing their own taxes – or divorced and wondering which parent can claim which education credit — our seasoned CPAs can help walk you through the process prior to filing.