Tax Credits for Higher Education

Just a note that in order to claim these credits we MUST have a 1098-T from the student.

Two Tax Credits Help Pay Higher Education Costs

Did you, your spouse or your dependent take higher education classes last year? If so, you may be able to claim the American Opportunity Credit or the Lifetime Learning Credit to help cover the costs. Here are some facts from the IRS about these important credits.

The American Opportunity Credit is:

• Worth up to $2,500 per eligible student.
• Only available for the first four years at an eligible college or vocational school.
• Subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than your taxes.
• For students earning a degree or other recognized credential.
• For students going to school at least half-time for at least one academic period that started during the tax year.
• For the cost of tuition, books and required fees and supplies.

The Lifetime Learning Credit is:

• Limited to $2,000 per tax return, per year, no matter how many students qualify.
• For all years of higher education, including classes for learning or improving job skills.
• Limited to the amount of your taxes.
• For the cost of tuition and required fees, plus books, supplies and equipment you must buy from the school.

For both credits:

• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. Make sure it’s correct.
• You must file Form 8863, Education Credits, to claim these credits on your tax return.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your return.
• Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits.

See Publication 970, Tax Benefits for Education for more on this topic. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Boost Your Retirement Savings with a Tax Credit

Boost Your Retirement Savings with a Tax Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be eligible for the Saver’s Credit. The Saver’s Credit can help you save for retirement and reduce the tax you owe. Here are five facts from the IRS that you should know about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2013 tax return if you’re:

• Married filing separately or a single taxpayer with income up to $29,500

• Head of household with income up to $44,250

• Married filing jointly with income up to $59,000

3. Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2013.

• You can’t be claimed as a dependent on another person’s tax return.

4. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2013. The due date for most people is April 15, 2014.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software will do this for you if you e-file.

The Saver’s Credit is in addition to other tax savings you can get if you set aside money for retirement. For example, you may also be able to deduct your contributions to a traditional IRA.