How to Claim the American Opportunity Tax Credit (AOTC) and Lifelong Learning Credit (LLC) According to IRS Guidelines

If you are a university student or a technician, this note is of interest to you, as you can benefit from an educational credit by reducing the amount of taxes owed on your tax return or that of your parents or guardians. Learn how you can claim the American Opportunity Tax Credit (AOTC) and the Lifelong Learning Credit (LLC), according to the IRS.

Unlike other education tax credits, the AOTC is allowed for course-related expenses for books, supplies, and equipment that are not necessarily paid to the educational institution but are necessary for attendance. It also differs because you can claim the credit for four tax years instead of having no limit on the number of years the LLC can claim. If the credit reduces your taxes below zero, you may get a refund.

WHO CAN CLAIM AN EDUCATIONAL CREDIT?

Although the American Opportunity Tax Credit (AOTC) and the Lifelong Learning Credit (LLC) have their own rules, in both cases you must meet these three requirements to claim the educational credit:

• The applicant, dependent, or third party pays qualified education expenses for higher education.
• An eligible student must be enrolled in a eligible educational institution.
• The student who meets the criteria is you, your spouse, or a dependent who is indicated on your tax return.

NOTE: If you meet the criteria to claim the Lifetime Learning Credit and also to claim the American Opportunity Credit for the same student in the same year, you may choose to claim either credit, but not both.

WHAT IS THE LLC CREDIT LIMIT?

The amount of the credit is 20 percent of the first US$10,000 of qualified education expenses or a maximum of US$2,000 per return. Lifelong Learning Credit (LLC) is non-refundable. Therefore, you can use the credit to pay any taxes you owe, but you will not receive any part of the credit as a refund.

WHAT ARE THE LIMITS OF AOTC CREDIT?

The American Opportunity Tax Credit (AOTC) is a credit for qualified educational expenses paid by an eligible student during the first four years of higher education. You can get a maximum annual credit of US$2,500 per eligible student, the IRS explains. If the credit reduces the amount of taxes you owe to zero, you can be refunded 40 percent of any remaining amount of the credit (up to US$1,000).

The amount of the credit is 100 percent of the first US$2,000 of qualified educational expenses you paid for each eligible student and 25 percent of the next US$2,000 of qualified educational expenses you paid for that student.

To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly). If your Magi reaches US$90,000 and US$180,000 if you are married, your benefit is reduced. If these figures exceed, you cannot access credit.

ABOUT THE AUTHOR

Journalist with more than 20 years of experience, working in different areas in print and digital media. Currently, she works as editor of the Audience Nucleus of the El Comercio Group.

2024-02-18 06:35:13
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