|During School: Lifetime Learning Tax Credit
The lifetime learning credit is a tax credit available to individuals who file a tax return and owe taxes. This means the amount of the credit is subtracted directly from a family’s actual tax liability, rather than reducing taxable income like a tax deduction does. The lifetime learning credit is not refundable.
To qualify for the credit, the taxpayer must report the amount of tuition and fees paid, as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees. Current law specifies that schools must supply this information on form 1098-T to individual taxpayers and to the IRS. The taxpayer may claim the tax credit and figure the amount to claim by completing parts II and III of IRS Form 8863.
The taxpayer: An eligible taxpayer must file a tax return and owe taxes to claim the credit. The taxpayer must also claim the eligible student as a dependent unless the credit is for the taxpayer or the taxpayer’s spouse. The amount of your lifetime learning credit was gradually reduced in 2005 (phased out) if your modified adjusted gross income (MAGI) is between $43,000 and $53,000 ($87,000 and $107,000 if you file a joint return). You cannot claim a credit if your MAGI is $53,000 or more ($107,000 or more if you file a joint return).
The student: An eligible student may be enrolled at least half time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student’s job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer. For more information, visit http://www.irs.gov/publications/p970/ch03.html.
|During and After School: Student Loan Interest Deduction
Taxpayers with qualified student loans may deduct the interest they paid for themselves, their spouse or their dependants. You do NOT have to be in repayment to be eligible for this deduction. Your voluntary payments of interest and required payments are both eligible. This deduction is an adjustment to taxable income, so a taxpayer may claim the deduction even if they do not itemize deductions on Schedule A. The maximum deduction is $2,500 per year. For more information, visit http://www.irs.gov/faqs/faq-kw190.htm.