A report by the Government Accountability Office found that nearly 14 percent of all tax filers failed to claim a credit for which they were eligible. Tax credits help us afford higher education expenses by reducing the amount of income tax we have to pay or by issuing a refund. Unfortunately, millions of students and their families are unaware or don’t apply for the correct tax benefits, leaving much-needed dollars on the table—an average of $466 for each qualified filer!
Are you one of them?
Recently, NCLR joined Rep. Danny Davis (D–Ill.) and others on a campaign to get more people to apply for their education tax benefits. The Tax Breaks 4Students campaign encourages eligible students and families to apply for tax credits.
While eligibility criteria vary for each credit, there are a number of options available for students and families. The two largest tax credits available are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), although there are many others.
American Opportunity Tax Credit
The AOTC can be claimed for the first four years of post-secondary education if a student is enrolled at least part time in courses. The maximum tax credit for AOTC is $2,500, and up to $1,000 is available as a refund if you owe no taxes. If you are a current graduate student, you are not eligible for AOTC; however, you may be eligible for the Lifetime Learning Credit.
Lifetime Learning Credit
The LLC provides up to $2,000 per year for a student enrolled at least part time. Unlike the AOTC, the LLC has no limit on the number of years it can be claimed, meaning it is available to graduate students and those in continuing education programs. However, if the credit is greater than the total amount owed in taxes, it will not be issued as a refund.
How do I claim these credits?
The IRS provides an interactive guide to help you determine whether you qualify for a tax credit. Only students who attend schools participating in federal student aid programs can qualify for the AOTC. Once you confirm eligibility, the IRS provides Form 8863 to help you calculate the education tax credit. Most education institutions will mail you Form 1098T, which provides this information for you.