Educational Benefit Guidance as provided by IRS Tax Tip 2019-145, October 17, 2019. Not all scenarios and enrollments at PC Professor may qualify for tax credits and/or deductions. You are strongly encouraged to check with IRS in advance and to thoroughly discuss these and/or any other educational tax-savings with your CPA prior to registration at our school.
Taxpayers can compare eligibility and benefits of two education credits
There are two education credits that can help taxpayers with higher education costs: the American opportunity tax credit and the lifetime learning credit. There are several differences and some similarities between them. Taxpayers can claim both benefits on the same return, but not for the same student or same qualified expenses. Here’s a comparison of these two credits:
What is the maximum credit or benefit?
American opportunity tax credit: Up to $2,5000 credit per eligible student
Lifetime learning credit: Up to $2,000 credit per tax return
Is it refundable or non-refundable?
American opportunity credit: Refundable for up to 40 percent of credit
Lifetime learning credit: Not refundable
Can taxpayers claim the credit if they file with the filing status married filing separately?
Both credits: No
What is the limit on maximum adjusted gross income for the other 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
Can a taxpayer claim credit if they be claimed as a dependent on someone else’s tax return?
Both credits: No
Must the taxpayer or their spouse be a US citizen or resident alien?
Both credits: Yes, unless nonresident alien is treated as resident alien for tax purposes.
What is the number of tax years for which the credit is available?
American opportunity credit: Four tax years per eligible student
Lifetime learning credit: Unlimited
What type of program is required?
American opportunity credit: Student must be pursuing degree or other recognized education credential
Lifetime learning credit: Student doesn’t need to be pursuing degree or other recognized education credential
What is the number of courses for which the credit is available?
American opportunity credit: Must be enrolled at least half time for at least one academic period in 2019
Lifetime learning credit: Available for one or more courses
What qualified expenses does the credit cover?
American opportunity credit: Tuition, required enrollment fees, course materials
Lifetime learning credit: Tuition and fees required for enrollment and attendance
For whom can the taxpayer claim the credit?
Both credits: the taxpayer, their spouse, or a student they claim as a dependent on their tax return
Who must pay the qualified expenses?
Both credits: the taxpayer, their spouse, the student, or a third party
There are several differences and some similarities between the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You can claim both benefits on the same return but not for the same student or same qualified expenses.
Education Credits Comparison
|Maximum credit or benefit||Up to $2,500 credit per eligible student||Up to $2,000 credit per return|
|Refundable or nonrefundable||40% of credit||Not refundable|
|Limit on MAGI for married filing jointly||$180,000||$134,000|
Limit on MAGI for single, head of household, or qualifying widow(er)
|Can you file married filing separately?||No|
|Dependent status||Cannot claim credit if you are claimed as a dependent on someone else’s return|
|Must you or your spouse be a U.S. Citizen or Resident Alien?||Yes, unless nonresident alien is treated as resident alien for tax purposes (see Publication 519 for information on nonresident alien status)|
|Number of years of post-secondary education available||Only if student hasn’t completed 4 years of post secondary education before 2018||All years of post secondary education and for courses to acquire or improve job skills|
|Number of tax years credit available||4 tax years per eligible student including any years former Hope credit claimed||Unlimited|
|Type of program required||Student must be pursuing a degree or other recognized education credential||Student does not need to be pursuing a degree or other recognized education credential|
|Number of courses||Student must be enrolled at least half time for at least one academic period||Available for one or more courses|
|Felony drug conviction||No felony drug convictions||Does not apply|
|Qualified expenses||Tuition, required enrollment fees and course materials needed for course of study||Tuition and fees required for enrollment or attendance|
|For whom can you claim the benefit?||
|Who must pay the qualified expenses?||
|Do I need to claim the educational credit on a schedule or form?||Yes, Form 8863, Education Credits||Yes, Form 8863, Education Credits|
Important: Always check with the IRS, your attorney or a CPA in order to comply with the latest in what can sometimes be complex accounting laws.