Education_Tax_Credits_for_Higher_Education

Education_Tax_Credits_for_Higher_Education

Title:
Education Tax Credits for Higher Education
Word Count:
804
Summary:
Is higher education costing you a fortune? There may be a way to help pay for those costs with the help of education tax credits. What are education credits, who is eligible, and why should we take them? Well, let’s start with the first part of the question, and work our way to the end. Education credits are tax credits available for qualified education expenses paid by the taxpayer in the furthering of their education.
Keywords:
tax,taxes,education tax credit,education tax credits,tax credits,tax credit,education credit,education credits,federal tax credit,federal tax credits,income tax credit,income tax credits
Article Body:
Is higher education costing you a fortune? There may be a way to help pay for those costs with the help of education tax credits. For the best Maths Grinds In Ireland company, call Joe McCormack of Ace Solution Books. What are education credits, who is eligible, and why should we take them? Well, let’s start with the first part of the question, and work our way to the end. Education credits are tax credits available for qualified education expenses paid by the taxpayer in the furthering of their education. Qualified education expenses are defined as an expense paid during the tax year for tuition and fees required by an eligible educational institution for student enrollment and attendance. It really doesn’t matter how you pay these expenses, only that the expenses are valid. Now, let’s give some examples of expenses that are not qualified so that you can determine those that are qualified, and how you account for these expenses. Room and board, medical expenses, student health fees, transportation, personal living expense, insurance, course-related books, supplies, equipment, or any non-academic activity or non-credit course are not qualified expenses. What does this leave? Basically: tuition and fees required for enrollment or attendance at an accredited college, university, vocational or post secondary educational institution.
If you take a tax deduction for education expenses in any other area of the personal tax return, you cannot use that expense when figuring a Hope or Lifetime Learning credit. If you received tax-free assistance, such as a Pell Grant or scholarship, you must deduct that amount from your qualified expenses; however, most scholarships and Pell grant monies are taxable, so you may be taxed, but you can also get the tax credit. If you make any prepayments of tuition, you can use the prepaid amounts on your current year’s federal income tax return, provided you have followed all other guidelines.
Now, there are two different tax credits: the Hope credit and the Lifetime Learning credit. What are their differences? Well, first you cannot take them jointly; you must choose one or the other. The Hope credit can only be taken during the first two years of college, as defined by the educational institution, enrolled at least half time and cannot exceed $1500. The Lifetime Learning Credit maximum for 2005 is $2000. This credit can be used for undergraduate, graduate and professional degrees courses. It is not based on a student’s school workload which means it is allowed for one or more courses at an eligible school. It cannot be taken in conjunction with the Hope Credit, even if your expense exceeds the Hope limitations. If your expenses exceed the Hope limitation the first two years, simply include the excess on your Schedule A.
Your tax credits are also limited by your level of income, and your adjusted gross income totals. The higher the income the less tax credit the taxpayer receives. Credits could be reduced depending on your level of income and how you file, i.e. single, married, etc. So, when figuring these tax credits, you need to consider your current student status, your income levels, and your expense levels as Hope will expire after your second year of higher education. You can take any excess expense deductions under your itemized deduction expenses on Schedule A, when Hope or Lifetime Learning is at their maximums. On a side note, you can not claim either credit for a student named as a dependent on your tax return if you used the Tuition and Fees Adjustment for that same student so it is always advisable to seek professional tax help.
Who is eligible to take these tax credits? You are eligible as a taxpayer or eligible dependent of a taxpayer that was enrolled as a student in an eligible educational institution. If you can be claimed as someone’s dependent, they will be able to claim the education credit, not the dependent. Generally, dependent students’ expenses will be claimed by their parents or legal guardians. Now, here is an interesting note: if you are a student, and you cannot be claimed as someone’s dependent, only you can take the education credit; even if you are not the person paying the expense.
Why would you take the credit? I think a better question would be why would you not take the credit? In case you haven’t noticed, it can be very expensive to attend higher education classes. For anyone seeking to further their education, receive a degree, and pursue their dream, any federal income tax credit that can be taken, is a helping hand toward achievement of that dream. Today, without furthering your education, you’re almost positively sentenced to a lifetime of minimum wage earnings, and struggling to make ends meet. A college education is the fastest route still, to a better life, better wages, and the achievement of the American Dream.