Education Credits

Taxpayers who pay for higher education can see tax savings when they file their tax returns. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.

There are two credits available to help taxpayers offset the costs of higher education. The American opportunity credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

The American opportunity credit is:
  • Worth a maximum benefit up to $2,500 per eligible student
  • Only for the first four years at an eligible college or vocational school
  • For students pursuing a degree or other recognized education credential
  • Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.
The lifetime learning credit is:
  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify
  • Available for all years of postsecondary education and for courses to acquire or improve job skills
  • Available for an unlimited number of tax years

To be eligible to claim the American opportunity credit, or the lifetime learning credit, the law requires a taxpayer or a dependent to have received a Form 1098-T from an eligible educational institution.

 

Earned Income Tax Credit

The earned income tax credit is a benefit for working people with low and moderate incomes. To qualify, taxpayers must meet certain requirements and file a tax return, even if they don’t owe any tax or aren’t required to file. Here are some things you should know about the EITC:

It’s Important to Review Eligibility

·  Taxpayers who worked and earned less than $53,930 may qualify.  

·  Filers should review EITC eligibility rules if their household income or family situation has changed. They may qualify for EITC this year, even if they didn’t in the past. 

·  Taxpayers must file a federal income tax return claiming the credit.  This is true even if a taxpayer isn’t otherwise required to file a tax return.

Taxpayers Should Understand the Rules Before They Claim EITC 

·  Taxpayers who are married and file a separate return don’t qualify for the EITC.

·  Filers must have a Social Security number valid for employment for themselves, their spouse if they’re married, and any qualifying child listed on their tax return.

·  Taxpayers must have earned income. This may include earnings from working for someone else as an employee or being self-employed.

·  Filers may be married or single, and with or without qualifying children to qualify. For a child to qualify, they must have lived with the taxpayer for more than six months. In addition, the child must meet the age, residency, relationship and joint return rules to qualify. Filers who don’t have children must also meet the age, residency and dependency rules.

The Credit Can Lower Tax Owed or Result in a Refund

The EITC could be worth up to $6,318 for qualified taxpayers.