Education Tax Credits For Higher Education

Education Tax Credits for Higher Education
Is higher education costing you​ a​ fortune? There may be a​ way to​ help pay for those costs with the​ help of​ education tax credits. What are education credits,​ who is​ eligible,​ and why should we take them? Well,​ let’s start with the​ first part of​ the​ question,​ and work our way to​ the​ end. Education credits are tax credits available for qualified education expenses paid by the​ taxpayer in​ the​ furthering of​ their education. Qualified education expenses are defined as​ an expense paid during the​ tax year for tuition and fees required by an eligible educational institution for student enrollment and attendance. it​ really doesn’t matter how you​ pay these expenses,​ only that the​ expenses are valid. Now,​ let’s give some examples of​ expenses that are not qualified so that you​ can determine those that are qualified,​ and how you​ account for these expenses. Room and board,​ medical expenses,​ student health fees,​ transportation,​ personal living expense,​ insurance,​ courserelated books,​ supplies,​ equipment,​ or​ any nonacademic activity or​ noncredit course are not qualified expenses. What does this leave? Basically tuition and fees required for enrollment or​ attendance at​ an accredited college,​ university,​ vocational or​ post secondary educational institution.
If you​ take a​ tax deduction for education expenses in​ any other area of​ the​ personal tax return,​ you​ cannot use that expense when figuring a​ Hope or​ Lifetime Learning credit. if​ you​ received taxfree assistance,​ such as​ a​ Pell Grant or​ scholarship,​ you​ must deduct that amount from your qualified expenses; however,​ most scholarships and Pell grant monies are taxable,​ so you​ may be taxed,​ but you​ can also get the​ tax credit. if​ you​ make any prepayments of​ tuition,​ you​ can use the​ prepaid amounts on​ your current year’s federal income tax return,​ provided you​ have followed all other guidelines.
Now,​ there are two different tax credits the​ Hope credit and the​ Lifetime Learning credit. What are their differences? Well,​ first you​ cannot take them jointly; you​ must choose one or​ the​ other. the​ Hope credit can only be taken during the​ first two years of​ college,​ as​ defined by the​ educational institution,​ enrolled at​ least half time and cannot exceed $1500. the​ Lifetime Learning Credit maximum for 2018 is​ $2000. This credit can be used for undergraduate,​ graduate and professional degrees courses. it​ is​ not based on​ a​ student’s school workload which means it​ is​ allowed for one or​ more courses at​ an eligible school. it​ cannot be taken in​ conjunction with the​ Hope Credit,​ even if​ your expense exceeds the​ Hope limitations. if​ your expenses exceed the​ Hope limitation the​ first two years,​ simply include the​ excess on​ your Schedule A.

Your tax credits are also limited by your level of​ income,​ and your adjusted gross income totals. the​ higher the​ income the​ less tax credit the​ taxpayer receives. Credits could be reduced depending on​ your level of​ income and how you​ file,​ i. e. single,​ married,​ etc. So,​ when figuring these tax credits,​ you​ need to​ consider your current student status,​ your income levels,​ and your expense levels as​ Hope will expire after your second year of​ higher education. you​ can take any excess expense deductions under your itemized deduction expenses on​ Schedule A,​ when Hope or​ Lifetime Learning is​ at​ their maximums. on​ a​ side note,​ you​ can not claim either credit for a​ student named as​ a​ dependent on​ your tax return if​ you​ used the​ Tuition and Fees Adjustment for that same student so it​ is​ always advisable to​ seek professional tax help.
Who is​ eligible to​ take these tax credits? you​ are eligible as​ a​ taxpayer or​ eligible dependent of​ a​ taxpayer that was enrolled as​ a​ student in​ an eligible educational institution. if​ you​ can be claimed as​ someone’s dependent,​ they will be able to​ claim the​ education credit,​ not the​ dependent. Generally,​ dependent students’ expenses will be claimed by their parents or​ legal guardians. Now,​ here is​ an interesting note if​ you​ are a​ student,​ and you​ cannot be claimed as​ someone’s dependent,​ only you​ can take the​ education credit; even if​ you​ are not the​ person paying the​ expense.
Why would you​ take the​ credit? I ​ think a​ better question would be why would you​ not take the​ credit? in​ case you​ haven’t noticed,​ it​ can be very expensive to​ attend higher education classes. For anyone seeking to​ further their education,​ receive a​ degree,​ and pursue their dream,​ any federal income tax credit that can be taken,​ is​ a​ helping hand toward achievement of​ that dream. Today,​ without furthering your education,​ you’re almost positively sentenced to​ a​ lifetime of​ minimum wage earnings,​ and struggling to​ make ends meet. a​ college education is​ the​ fastest route still,​ to​ a​ better life,​ better wages,​ and the​ achievement of​ the​ American Dream.

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