Expenditures for higher education are eligible for many types of tax breaks. But there are distinctive qualifications for each option. Taxpayers normally find that hiring someone with IRS Registered Tax Return Preparer training is the right way to assess the tax benefits. The complexity of the decision is worth paying for by many taxpayers.
Most of the tax preparer software used by professionals selects the optimal tax advantage of higher education expenses. However, the software optimization feature must be utilized only after all other tax data is entered.
This permits correct assessment of ineligibility for some types of education tax credits due to high income.A professional who meets Registered Tax Return Preparer requirements understands the eligibility for all tax credits related to education expenses. This allows recognition of an applicable tax credit before starting a tax return in order to gather complete details.
For example, education tax credits phase out at high income levels.There are some important rules about education tax credits known to someone with RTRP certification. This avoids mistakes by taxpayers using software to prepare their own tax returns. One consideration is that education expenses claimed for a tax credit cannot include amounts paid with grants or scholarships. However, eligible expenses do include those paid with gifts, inheritance, or proceeds of a loan.
Another matter covered in a paid tax preparer course is that individuals cannot claim education tax credits if they are dependency exemptions on the tax returns of others. However, a taxpayer is entitled to claim a credit for education expenses paid by a dependent. Anyone using status as married filing separately cannot claim education credits.
The familiar Hope Credit was replaced with a more generous American Opportunity Tax Credit for 2009 through 2012 tax returns. It provides each student with a credit of up to ,500 for higher education expenses covering tuition, fees, and materials – including computers.
The Hope Credit returns for the 2013 tax year. It permits a tax credit for up to ,800 of higher education expenses. This credit is only available for the first two years of post-secondary education. To qualify, a student must be pursuing a degree or recognized education credential.
The Lifetime Learning Credit is eligible to all students – even those not pursuing degrees. This credit is a maximum of the first ,000 of education costs. However, that is the maximum for each tax return. The Hope Credit maximum applies to each eligible student.
Both the Hope Credit and the Lifetime Learning Credit are eliminated for married taxpayers with income exceeding 0,000 and single taxpayers with income over ,000. Unlike the American Opportunity Tax Credit, the only eligible expenses for the Hope Credit and the Lifetime Learning Credit are those paid to the education institution as tuition and fees.
For students or parents who don't qualify for education tax credits, the deduction of tuition and fees is often available. This adjustment to income is available even to taxpayers who don't itemize deductions as long as their status is not married filing separately. The tuition and fees deduction isn't available if income is more than ,000 for single taxpayers and 0,000 for married couples.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.