WASHINGTON ― With another school year now in full swing, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.
In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.
For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.
Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits.