Education
credits
Overview
/ Introduction:
If you
or your dependent is a student, you may want to determine whether you are
eligible for one of the two educational tax credits that cover common student
expenses. These credits provide greater tax savings than a tuition deduction
since they reduce your tax bill on a dollar-for-dollar basis. If you are
eligible to claim both credits, you should choose the one that provides the
greatest tax savings for you.
Who
can claim?
Should meet all the following three conditions:
a. If you
pay qualified education expenses of higher education.
b. If you
pay the education expenses for an eligible student.
c. If the
eligible student is yourself, your spouse, or your dependent for whom you claim
an exemption on your tax return.
Some questions to glance for easy
understanding:
1.
What is the maximum
benefit?
You can
reduce your income subject to tax by up to $4,000.
2.
What is the limit on
modified adjusted gross income (MAGI)?
·
$160,000 - Married
Filing Joint.
·
$80,000 - Single, Head
Of Household, or Qualifying Widow(er).
3.
Where is the deduction
taken?
As an adjustment to income on Form 1040 or Form
1040A.
4.
For whom must the
expenses be paid?
A student enrolled in an eligible educational
institution who is either:
•You
•Your spouse
•Your dependent for whom you claim an exemption.
•You
•Your spouse
•Your dependent for whom you claim an exemption.
5.
What tuition and fees
are deductible?
Tuition and fees required for enrollment or
attendance at an eligible post secondary educational institution, but not
including personal, living, or family expenses, such as room and board.
6.
Who cannot claim
deduction?
You can't
claim the tuition and fees deduction if any of the following apply.
·
Your filing status is Married
Filing Separately.
·
Another person can claim an exemption for you as a dependent on
his or her tax return. You can't take the deduction even if the other person
doesn't actually claim that exemption.
·
Your modified adjusted gross income (MAGI) is more than $80,000
($160,000 if filing a joint return).
·
You (or your spouse) were a nonresident alien for any part of 2015
and the nonresident alien didn't elect to be treated as a resident alien for
tax purposes.
Expenses That Don't Qualify
- Insurance;
- Medical expenses (including
student health fees);
- Room and board;
- Transportation; or
- Similar personal, living, or
family expenses.
This is true even if the
amount must be paid to the institution as a condition of enrollment or
attendance.
Types
of Education credits:
1.
American
Opportunity Credits (AOC)
2.
Lifetime
learning Credits (LLC)
3.
Tuition
and Fees.
Source document Outlook is given
below:
Input
In Lacerte software is given below:
Preparing Form 8863:
If
you claim either of the tax credits, the IRS requires you to fill out Form 8863
and attach it to your tax return. Form 8863 requires you to calculate the
appropriate credit amount based on your eligible school expenses. In order to
claim the tax credit for yourself, you cannot be claimed as a dependent on a
different taxpayer's tax return. Otherwise, only that taxpayer is eligible to
claim the credit on your behalf.
Note : Depending on
the AGI Tuition & Fee deduction is disallowed.
Final
Output in 1040 Form, appears in Page 2 (line no.50)
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