The introduction of the American Opportunity Tax Credit had been one of President Obama’s major platforms since he started campaigning for president back in 2007. The only problem with it is this credit is only good for the first two years of a student’s education. That’s great if you’re going for an Associate’s degree, but what if you are in your third year of a four-year plan? Every student working toward college degrees online and on-campus need to be aware of all options available.
Actually, another credit was already there. Called the Lifetime Learning Credit, it was introduced in 2001 with the Hope credit. The Lifetime doesn’t offer as much as the Opportunity credit, yet it covers a larger portion of the population. So one should take the bad with this greater good. If you need more information about grants for college, look on the internet.
The Lifetime Learning Credit is for students who are in their third year of college, taking post-graduate courses or even going part time with as little as one class. Another key difference is a household can have multiple Learning Credits due to having more than one child in college.
As for the brass tacks of this credit, it gives a student (or the parents of) a 20% tax credit up to the first $10,000, i.e., up to $2,000, for educational expenses including tuition, text books, fees and other education-related items. The expense-related costs are much broader than with the Opportunity credit, and can even include travel if it’s for such things as field research.
Like the Opportunity credit, there is what’s called a “phase out” point. By that what is meant is if a single person earns over $60,000 or a couple filing a joint return earns over $120,000 adjusted income, they earn too much and would get nothing. Another important point is the IRS will only give out one check. If a child and the parents both file for the credit, the IRS will only give out one check (usually to the parent/s). There is an abundance of information about grant for online college on the web.
Other provisos include an individual can’t get both an Opportunity and a Lifetime credit; just one or the other. Yet, as said before, if a parent has more than one dependent in school, the parent can get credits for all of them if they meet the other criteria.
What must absolutely be understood is the Lifetime is a credit, not a tax deduction. You apply the Lifetime after totaling your taxes, not subtract it from the expenses. The IRS is doesn’t allow this kind of double dipping, and could reject the entire thing. There are a number of other peccadilloes the IRS has and some of them can be pretty detailed (such as advancing your education only to get a better job at another company). So one should have the entire tax form reviewed by an accountant before applying for it.
Now that’s making one’s education pay for itself. Working toward college degrees online and through campus-based attendance mean improving your career potential. While free scholarships and grants will definitely be of assistance, help yourself further by learning all about this credit.
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