With the rising costs of an extended education, post-secondary students
and their parents could use whatever help they can get in maximizing
expenditures. The Internal Revenue Service has two different credits
that may be of assistance. The trick is learning which tax credit will
provide you with the most benefit. Whyte and Associates is a tax and
accounting service that has been serving the Inland Empire since 1956.
We are here to help you make sense of qualified educational expenses.
Tuition and other expenses incurred as a direct result of college attendance are considered qualified educational expenses. As mentioned, there are two credits, only one of which may be used in a tax year. In each credit are specific qualified educational expenses:
Under the American Opportunity Credit, one may claim:
Under the Lifetime Learning Credit, a student may claim a
credit of 20 percent of up to $10,000 paid to a post-secondary
educational institution in that year. The courses taken do not
necessarily have to be in line with a course of study. The expenses
accounted for, however, must be required to take the class. For
instance, a recommended book that is not required would not qualify as
an educational expense. The Lifetime Learning Credit may not be
available depending on total income. Additionally, unlike the American
Opportunity Credit, the Lifetime Learning Credit requires that books and
equipment be purchased directly from the educational institution.
When attending college, a student may require equipment such
as a computer. Such an expense would qualify under the American
Opportunity Credit due to the leniency to purchase necessary course
material and equipment from a source outside of the educational
institution. Even a laptop computer can qualify under this credit if
other requirements are met.
What does not qualify under either of these credits is room and board, regardless of the distance between college and home. Living expenses, including transportation, remain the responsibility of the student and his or her family.
Your tax and accounting service in Rancho Cucamonga has more than half a century of experience in the planning and preparation of taxes. We can help you make sense of the various educational expenses and credits so that you are maximizing your full potential. Call (909) 575-0080 today.